May 8th, 2008
Stocks opened higher after several retailers posted surprisingly positive sales figures.
Wal-Mart reported a same store sales increase of 3.8 percent, while Costco reported an 8 percent increase. BJ’s Wholesale reported a huge increase of 17.8 percent. Wow.
It’s too bad the good fortune was not universal…Nordstrom, Limited Brands and the Gap saw same-store sales decline by 3.8, 5 and 6 percent respectively.
Is this discount retailer revival a sign of renewed life in consumer spending or is it just cash moving from one set of retailers to another?
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By profsilver -- 1 comment
May 7th, 2008
NYSE Euronext reported first quarter earnings of $230 million, up from $68 million last year. Bravo!!!
With the Dow sporting triple digit swings almost daily, stock markets have been quite volatile. High volatility comes from active trading and increased trading activity provides higher revenues for stock exchanges.
It would definitely be easier to quit searching the market for the next great stock and start investing in the market itself. But, would it be more profitable? Let’s see…
Past 5 days: NYSE has outperformed the indexes.
Past 3 months: The Dow, Nasdaq and S&P posted higher returns than NYSE Euronext.
Past 6 months: Ditto the 3 month results.
Past 2 years: Close call. The Nasdaq, S&P and NYSE Euronext virtually tied for second behind the Dow.
The markets will continue to flutter so NYSE Euronext can be assured of revenues in the near term, whether those revenues equate to continuously growing earnings remains to be seen, so don’t throw away those charts and ratios just yet!
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May 6th, 2008
It’s official: The economic slowdown has arrived in Sin City.
Last week, Wynn Resorts posted a profit drop of 20%, while Las Vegas Sands reported a loss for the same period. On Monday, Tropicana Entertainment filed for Chapter 11 bankruptcy protection. Today MGM Mirage reported a 29% drop in profits.
Sounds like a string of really bad luck, right?
The good news (if there is any) is that it seems as if the downturn had already been priced into these stocks. Take a look at their performance over the past six months: Wynn Resorts down 14%…Las Vegas Sands down 37%…MGM Mirage down 43%!
Casinos were often believed to be recession-proof. If I were a betting woman, I’d say those days are over.
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May 5th, 2008
Before the dust settled on Microsoft’s failed acquisition of Yahoo, news emerged of a possible deal involving Sprint and T-Mobile USA owner Deutsche Telekom.
T-Mobile is the fourth largest wireless company in the U.S. while Sprint ranks third. The combination would trump the market’s current leaders, Verizon Wireless and AT&T.
Mergers and acquisitions are often viewed positively by markets and investors. Sprint shareholders could definitely use the optimism! Before the M&A chat, the stock was down almost 60% since last September. Today’s speculation provided Sprint’s shares with a hefty 10% advance.
If it becomes official, this deal will have many hills to climb…for starters: antitrust issues and technology integration.
As evidenced by Yahoo’s 15% nosedive today, when big deals don’t happen, stocks suffer. Merit of the wireless merger claims has yet to be determined, but as long as rumors abound, Sprint will be fun to watch.
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May 5th, 2008
Microsoft has abandoned its efforts to acquire Yahoo…at least for now.
News of the collapsed deal has investors fleeing this stock like the plague! Less than one hour into the trading day, shares of Yahoo were down 20%. The sell-off has pulled back a bit and shares are down about 15% at mid-day.
It’s obvious that the higher-ups (particularly CEO Jerry Yang) at Yahoo are pleased about the demise of this potentially hostile takeover. But, investors seem to disagree. Microsoft’s offer produced a 50% run up in price for Yahoo shareholders and after today’s news, nearly half of that gain was erased.
Yahoo’s market value is now roughly $14 billion LESS THAN Microsoft’s bid. If the company does not find a way to regain today’s losses in the near future, Microsoft or another tech suitor could emerge with an even lower offer.
So Yahoo gets to stay independent, but at whose expense?
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May 2nd, 2008
No, I didn’t invent a new acronym for naughty words!
TAF = Term Auction Facility. Through this program, the Fed loans banks up to $100 billion every month in 28-day loans against different types of collateral.
The Fed has just announced plans to expand TAF, along with the range of acceptable collateral (i.e. credit card receivables and auto loans).
In last month’s TAF auction, banks submitted bids for $88 billion. Here’s the catch: there was only $50 billion available. Demand has far exceeded the supply of TAF loans for the past five months. Wonder why?
What economists say: “The interbank market is frozen by fear of counterparty credit risks.” -M. Feroli, JPMChase
What I say: Banks don’t trust other banks to pay back debts.
In recent periods collateral has been shaky. It has been hard to determine the true owner and hard to determine the true value (a la Bear Sterns). Now that banks have suddenly become risk-averse, the old collateral just isn’t enough to get a new loan.
That’s where TAF comes in handy…why borrow from another bank when you can borrow from the Fed?
Mortgage backed securities…now credit cards and auto loans… is the Fed engaging in too much risky business?
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May 1st, 2008
The Fed Funds target rate was cut by another 25 basis points yesterday, taking the rate from 2.25% down to 2%.
But, a lower Fed Funds rate doesn’t necessarily mean lower interest rates for all. This target rate adjusted by the Fed is a guideline for the rates charged between large banks, for large loans.
The rate which many consumer loans (i.e. credit cards, home equity lines of credit) are linked to is the “prime” rate. Prime moves right along with the Fed Funds rate, like a mirror… but one of those not-so flattering, camera adds 10 pounds (or 300 basis points) kind of mirrors.
You’ve got to figure that if a bank charges its peers prime, then it will charge you prime and then some. “And then some” depends on how good or bad your credit is.
Some rates move in tandem with the Fed Funds rate, others don’t. Whether the Fed’s cuts help you depends on the nature of your loans (i.e. fixed or adjustable) and the rate(s) they are linked to.
Have the Fed’s cuts helped you?
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April 30th, 2008
DVD sales from ”Shrek the Third” combined with box office sales from “Bee Movie” helped Dreamworks (DWA) post a 69% increase in profits this quarter. Wonder what’s next?
Dreamworks has upcoming projects including “How to Train Your Dragon” and “Monsters vs. Aliens.” And for those of you who thought Shrek was finished, think again! Shrek: The Musical hits Broadway this fall.
I guess I am the only one who didn’t see the third installment of Shrek or the Jerry Seinfeld turned insect flick…and I am perfectly okay with that. I am also pleased to see someone benefit from $10 movie tickets. Can you remember when movies were $4? Now that’s the price of a soda!
The stock was up as much as 10% in early trading but gains have settled at about 7% heading into the mid-day. I am definitely going to keep an eye on this stock. As for their upcoming films…not so sure ;)
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By profsilver -- 1 comment
April 29th, 2008
Shares of the pharmaceutical giant, Merck, plunged 10% today on news that the FDA has rejected the company’s new cholesterol drug, Cordaptive.
The company’s stock has been battered in recent months, dropping about 36% since December.
The Cordaptive snub has deepened Merck’s recent decline but, this is no death sentence.
Prognosis: Bruised but not broken…shout out to Joss Stone for a great song :)
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April 29th, 2008
CNN recently found that 74% of Americans think the economy is in a recession. But, according to the technical definition of a recession, this is impossible. How can this be???
One widely accepted definition of a recession includes the observation of two quarters of declining growth (as measured by GDP). But, when it comes to a word like “recession,” does anyone actually care about the textbook definition? Apparently not. It appears that the recession jitters are contagious! You can catch them at the gas station or in the dairy aisle of your local supermarket.
Maybe recessions aren’t just about GDP growth. Perhaps they reflect consumer sentiment regarding jobs, prices and the economy among other things. In any case, the combination of job cuts, rising prices and a massive credit crunch probably does not bode well with most consumers.
Many people don’t need Ben Bernanke to confirm the country is in recession, because they already think it is. Besides, Warren Buffett said so. And who is going to argue with him? ;)
Do you think the economy is in a recession?
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