Amid a buzz of publicity, yesterday was the day that many Beatles fans had eagerly waited for, with the release of a new video game in the band’s name – “The Beatles: Rock Band.”

If you’re not familiar with the “Rock Band” concept, it’s a bit like karaoke, except you play music in addition to singing. Gamers follow along with their favorite musicians/songs, using an electronic drum kit and guitar, and sing the songs, too.

The game is enormously popular, having generated over $1 billion in revenue. And gamers can download individual songs, albums, or catalogs of groups like AC/DC, The Who and The Grateful Dead. So far, they’ve paid for and downloaded over 40 million songs…

Both Paul McCartney and Ringo Starr were part of the creative process and have endorsed the game in the ensuing media hype that developed.

But what about you and me? Well, while we might never be as wealthy as the “Fab 4,” perhaps we can profit from a new wave of Beatle Mania.

These “Fab Four” Stocks Are Set for a “Beatle Boost”

Let’s take a look at four companies that could make big bucks off the The Beatle’s Rock Band release…

• Viacom (NYSE: VIA.B): This firm should be the biggest beneficiary of the game’s success. Its MTV unit owns Harmonix Music Systems, the creator of “Guitar Hero” and several “Rock Band” titles, including “The Beatles.”

Viacom also owns cable TV staples such as Comedy Central, VH1, Nickelodeon and CMT. In addition, it produces and distributes movies through its Paramount Pictures division.

However, Wall Street likes Viacom about as much as conservatives liked Paul, John, George and Ringo’s mop-top haircuts in the 1960s. Analysts currently have eight “Buy” recommendations on the stock, 17 “Holds” and eight “Sell” ratings.

Keep in mind that most analysts rate stocks as “Buy.” A “Hold” essentially means sell, while an outright “Sell” rating means “this stock is so bad, even we don’t want the firm’s investment banking business.”

And note that Wall Street analysts have a horrendous track record when it comes to rating stocks.

So given my contrarian nature, I like stocks that have lots of “Hold” and “Sell” ratings, since analysts are often behind the curve and afraid to go against the grain. When a company turns around, they’re then forced to upgrade the stock and that often leads to gains in the share price.

And as for Viacom, the future doesn’t look as bad as they portray it. The company is expected to earn $2.05 per share in 2009, followed by a nearly 10% increase to $2.25 next year. In 2011, Wall Street projects earnings of $2.61.

The stock trades at just 12 times this year’s expected earnings, 11 times next year’s and just 1.1 times its trailing 12-month sales.

Viacom shares seem cheap. And if the game sells as well as I believe it will, shareholders will reap the reward.

• Sony Corporation (NYSE: SNE): Sony owns partial rights to The Beatles’ music catalog. That means every time a Beatles record is purchased, a song is downloaded, or a tune is played on the radio, Sony rings the register. The rights are held by Sony/ATV Publishing, a joint venture between Sony and Michael Jackson’s estate.

Of course, Sony has other businesses, too, aside from waiting for oldies radio stations to play Yellow Submarine…

It makes the ever-popular PlayStation video game consoles, on which users can play “The Beatles: Rock Band” (in addition to Microsoft’s X-Box and Nintendo’s Wii systems). Sony also makes a mass of other electronic equipment and is in the television and movie businesses.

Wall Street isn’t exactly enamored with the company at the moment. There are 12 “Buy” recommendations against 10 “Holds” and one “Sell.”

After a series of missteps, Sony isn’t expected to be profitable this year or next. But it does boast a strong film division and restructuring could result in its weak stock price rebounding.

• Electronic Arts (Nasdaq: ERTS): The company is the publisher of “The Beatles: Rock Band.” Like Viacom and Sony, Wall Street thinks it’s also going to be a Hard Day’s Night for ERTS. There are 14 analysts who believe the stock is a “Buy,” while 15 say, “Hold” and three have a “Sell” verdict.

In the face of stiff competition and few exciting new titles, Electronic Arts is expected to lose 30 cents per share this year. But in 2010, the books are expected to turn into the black, with the company projected to earn 97 cents per share, rising to $1.27 in 2011. In addition, it has over $2 billion in cash and no debt, and enjoyed recent success with its EA Sports Active.

The stock has suffered a beating, but has thus far failed to mount much of a rally, unlike many others who also took a hit in the downturn.

But should “The Beatles” and other games help turn things around, Electronic Arts might wind up being a great contrarian play.

• Gamestop (NYSE: GME): If you have a teenager, chances are they already spend Eight Days A Week browsing and playing games at Gamestop, a leading video game retailer in the United States, Europe, Canada and Australia.

The firm should benefit from increased consumer traffic related to purchases of “The Beatles,” plus a host of other games and accessories that it sells.

In contrast to the other three companies, Gamestop is much more popular, with analysts in giving it 14 “Buy” ratings and just two “Holds.” While earnings growth isn’t exactly stellar – EPS is estimated at $2.40 this year and $2.55 next year – the stock is cheap at 10 times this year’s EPS.

If you want to talk “best of breed” in the video game retailing world, Gamestop is it. Gamers can sell back or trade their games at Gamestop for other titles, which gives the company an advantage over retailers like Amazon.com (Nasdaq: AMZN) and eBay (Nasdaq: EBAY). Plus, in addition to browsing the store, gamers can test-drive the games on the demo consoles and talk with employees, who are usually gaming enthusiasts, too.

Gamestop is gaining market share and is cheap enough to buy at current levels. If the upcoming holiday season is particularly strong, look for it to beat estimates and send share prices higher.

These four stocks have the potential to generate significant gains and put money in our pockets. And I hope we manage to make gobs of it. Just remember, money Can’t Buy Me Love.

Marc Lichtenfeld

Source: A New Wave of ‘Beatle Mania’… Four Ways to Profit from the Beatles: Rock Band

The stock is still a far cry from its record-high level of $83.56, but is only 0% below its 52-week high of $53.46.  Much has changed since then, as the U.S. auto industry is no longer producing the 16 million cars it produced in 2007, nor the 13 million it managed to sell last year.  This year we are looking at some 10 million units sold, according to J.D. Power and Associates, the leading forecaster in the industry.

But there is encouraging news:  The very quick restructuring of both General Motors Corp. (NYSE: GRM) and Chrysler Group LLC, the U.S. Federal Reserve’s efforts to stabilize the financial markets, and the U.S. government’s fiscal stimulus plans have helped keep the economy from falling into a depression.  The Fed’s support for the auto industry included buying auto receivables under the Term Asset-Backed Securities Loan Facility (TALF) program, in order to restart this type of securitization.

Therefore, the paralysis of sales that we saw late last year, when the financial system froze and there was no financing available, has subsided and sales are increasing.  In fact, J.D. Power expects U.S. vehicle sales to increase to 11.5 million units next year, a full 15% pickup from projected 2009 levels.

In fact, we are already seeing an increase in auto sales already, thanks in no small part to the government’s Car Allowance Rebate System (CARS), popularly known as “Cash for Clunkers.” So far, CARS has spent some $1.29 billion and Congress has expanded the original $1 billion authorization by another $2 billion.

Total light vehicle sales for July were just shy of 1 million units, a milestone the industry hasn’t topped since August 2008, mostly due to the program’s success.

This shot in the arm on the back of the general cost restructuring that Ford Motor Co. (NYSE: F) is carrying out under Allan Mulally has already prompted Ford to increase production of its Focus model.

Similarly, Chrysler has reported that it is running two plants in overtime and a third shift at another plant just to keep up with demand.  And GM, which is seeing a huge rebound in sales, will add to this by increasing advertising spending and selling new cars on eBay Inc.’s (Nasdaq: EBAY) popular online auction Web site. Most of Wall Street is in “wait-and-see” mode, which gives us more of an incentive to jump in.  But the steel story is not just about cars.

Nucor will not only profit from the remaining $1.75 billion to be deployed through the government’s cash for clunkers program and the general improvement in market conditions, but on the pick-up in government construction in the United States that will result from U.S. President Barack Obama’s massive fiscal stimulus.

Additionally, the company will benefit from the already massive stimuli being deployed in China, Brazil, India and Russia.  And let us not forget Europe, where the European Central Bank will soon consider raising its benchmark lending rate to 1.25% from its current record low of 1% in order to prevent inflationary expectations from building up.

China will achieve more than 8% growth this year, driven by public spending, especially in construction and a strong pickup in auto sales  (up 63.6% in July from a year earlier) and domestic appliances.  All of these have a very high content of steel.

Similarly, India’s gross domestic product (GDP) will grow by more than 6%, barely down from last year’s 6.7% expansion. Auto sales in India jumped 18% last month.  Remember that India’s Tata Motors Ltd. (NYSE ADR: TTM) launched the cheapest car in the world last January and this is likely to work wonders in today’s budget-conscious market.

So what about Nucor itself?

The company reported a second quarter loss of $133 million, which improved over the first quarter’s $189 million loss.  But the key is that volumes are already turning around.

Volumes increased 11% in the second quarter, which allowed the company to increase its capacity utilization from 45% to a still very low 46%.

And this is where the upside lies.

In capital-intensive industries like steel, the very high fixed costs induce very large swings in profits, depending on volumes.  And not only did Nucor see its volumes pick up in the second quarter, the trend should continue accelerating in the third quarter and beyond, thanks to the recent burst in car sales and increased government infrastructure spending.

In addition, prior to the cash for clunkers program, Nucor announced it already expected to see an improvement in its third-quarter results. The company said that many of its customers had run their inventories too low and would need to replenish them just to meet demand.

So, at reporting time, investors could be very positively surprised by Nucor and many other companies in the sector, which will provoke many analysts to increase their stock targets.

And to make the whole story even better, we are counting on increasing inflationary expectations and a weaker dollar, which will continue to drive portfolio managers to hedge this risk in commodity stocks.

That means Nucor, which has been bumping into strong resistance levels since the beginning of January, but making higher lows in every subsequent correction, is likely to break out of its current range with an explosive rally before it even reports third-quarter earnings.

Nucor stock closed down 92 cents, or 1.93%, Friday at $46.79 a share.

Source: Nucor Corporation Will Get Is Due for a Boost from Government Spending

Speaking of open interest numbers, gold o.i. on Thursday fell 3,216 contracts to 391,144…on absolutely monstrous volume of 174,662 contracts. Silver’s decline was much more modest…only 93 contracts to 96,309…on total volume of 18,664 contracts.

The Commitment of Traders report issued yesterday, was as expected. In silver, the bullion banks decreased their net short position by 1,522 contracts. This doesn’t seem like a very big number, but it’s impressive because o.i. fell in the face of a silver price that rose quite a bit during the reporting week. The full color COT report is linked here.

Gold o.i. was exactly as expected…with the bullion banks going short against every long…effectively stopping the gold rally in its tracks. The bullion banks increased their net short position by a staggering [but not surprising] 21,939 contracts. The bullion banks are now net short 204,226 contracts…20.4 million ounces. The full-color COT graph for gold is linked here.

We are now sitting with a COT structure that is bullish to very bullish for silver…and very bearish for gold. This situation has only existed a few times during the last ten years. Ted suggested [and not for the first time] that maybe ‘da boyz’ are trying to permanently separate silver and gold prices so that silver will rise independently of gold. That’s possible…but we’ll have to wait and see if it pans out that way.

The Comex Delivery Report for Friday showed that only 55 gold contracts were delivered…and nothing at all in silver. There were no changes in the alleged holdings of either GLD or SLV. The U.S. Mint has updated their production numbers in silver eagles again. This time they showed that another 275,000 silver eagles were minted…bringing the monthly total up to 2,300,000. Nothing was added for gold eagles. And the Comex-approved warehouses reported that 320,392 ounces of silver were withdrawn from their collective inventories.

The usual N.Y. gold commentator mentioned that The Gartman Letter’s buy stop at $955 was not triggered yesterday because gold did not, in fact, trade long enough above that price to trigger its buy. He also had this…”There is a good deal of commotion today regarding forecasts that China will pass India in gold consumption in some five years. It is odd that so many observers extrapolate about the intensely volatile Indian gold market based on a few months recent history. At the time of the enormous imports last summer, the talk might well have been of India monopolizing the world gold stock! In any case, China’s gold production, bolstered by subsidized fuel and the hugely undervalued Yuan apparently supplies almost all local demand (India mines almost no gold). How seriously can one take the Shanghai Gold Exchange, which today reports that the gold contract is backed by only 156 kilos of metal? The Bloomberg story is headlined “China May Overtake India in Gold Demand, Council Says”..and the link is here.”

The other day, several companies [i.e. Ford (NYSE:F), eBay (NASDAQ:EBAY) and AT&T (NYSE:T)] reported better than expected earnings and as a result, the stock market rallied on the news. While some companies have reported better than expected earnings for Q2/2009, others have struggled. Today’s chart provides some perspective on the current earnings environment by focusing on 12-month, as reported, S&P 500 earnings. You can see how earnings are expected [38% of S&P 500 companies have reported for Q2/2009] to have declined over 98% since peaking in Q3/2007, making this by far the largest decline on record…and the data goes back to 1936. I thank P.S. for providing this data…which is all [including the chart] courtesy of www.chartoftheday.com …the link to the website is here.

Besides the Bloomberg story embedded in the usual N.Y. gold commentator’s paragraph above, I have three other stories for your reading pleasure this weekend. The first is from yesterday’s edition of The Economist out of London. It bears the headline “Here today, gone by 2010: Russia reserve fund is emptying fast.” The story is certainly worth the read…and I thank P.S. for sending it along. The link is here.

The next story is from the hallowed halls of the The New York Times. It’s a story about high-frequency trading—which has become one of the most talked-about and mysterious forces in the markets. Casey Research’s own Bud Conrad was circulating this story around the company yesterday…and I thought it worthy of your time. It’s entitled “Stock Traders Find Speed Pays, in Milliseconds”…and the link is here.

The last story today is from commodityonline.com…and filed from Johannesburg. The title pretty much says it all…”New law boosts gold bar sale in South Africa.” Until I read this story, I wasn’t aware that South Africans were not allowed to own gold in bar form. You learn something new every day. The link is here.

Throughout all my years of investing, I’ve found that the big money was never made in the buying or the selling…the big money was made in the waiting. – Jesse Livermore

Today’s ‘blast from the past’ goes back to 1972. I believe that this was their biggest, if not their only, hit. But what a hit it was. Turn up your speakers and then click here.

Something appears to be up in the gold and silver market…which the latest COT confirms. Further rallies in gold never amount to much when the bullion banks are short this amount of gold. Sure, I’ve seen their short position as high as 26 million ounces…which is 55,000 contracts higher than we are today…so I guess we can go higher, but the odds are not in our favor. How high we go from here [if we do go higher] depends entirely on whether the bullion banks are prepared to take on an even larger short position. But once that high [whatever, and whenever it is] is in, there is only one direction gold can go…down. Will silver go with it? Don’t know, but Ted Butler says that they would have to get the price below its latest low, which is around $12.40…about $1.50 below where it closed yesterday…before there would be any more significant long liquidation by the tech funds and the small traders. The 200-day moving average is at $12.29. Ted doesn’t think they can do it. We’ll see.

I note in closing that this is the last edition of Casey’s Daily Resource Plus. I hope that you have found it to be both educational and entertaining. Many parts of it will be shuffled off into other reports…and as most of you already know, I’ve been fortunate enough to be given my own daily stand-alone column. That honor is entirely because of you, dear reader…and for that, I’m grateful, appreciative…and thankful.

Enjoy the rest of your weekend and I’ll see you next week with a brand new look…which I look forward to seeing for the first time myself…as I haven’t seen it yet either.

Source: And Then There’s This…Monday, July 27, 2009

That quickly turned to mania, as the media went nuts over it and fans clamored to pay their respects by buying tons of Michael Jackson merchandise. And MJ fever shows no signs of being ready to “Beat It.”

As demand for all things Michael has spiked, there’s are no doubt that many suppliers are willing to meet it. From vendors outside the Staples Center selling cheesy souvenirs, to multi-billlion dollar corporations, there are several beneficiaries of massive spending on Jackson’s music and memorabilia.

While I’m not suggesting you should unscrupulously profit from his demise, it’s a fact that some companies are enjoying a boom in Michael Jackson-related business. Here are four of them…

Four Companies At The Center Of The Michael Jackson Story

• eBay (Nasdaq: EBAY): As soon as tickets to the memorial were released, they predictably went on sale on eBay for thousands of dollars.

A search for “Michael Jackson” on eBay yielded 47,611 results, including an autographed photo for $3,200, a sealed version of “Thriller” for $1,200 and even this $1 million bill with Jackson’s face on it. And people say the Federal Reserve has recklessly printed money!

• Amazon.com (Nasdaq: AMZN) – If it’s for sale, chances are Amazon sells it. You can download the mp3 of “Thriller” for $1.29, purchase a “Michael Jackson Superstar of the 80s” outfit doll for about $1,000, or the Michael Jackson $1 million novelty notes above for $0.99 each (or 100 for $30). At that price, you can’t afford to be without your fake Michael Jackson currency.

• Sony (NYSE: SNE): Michael Jackson’s record label was Epic Records, part of Sony Entertainment. He’s sold half a million albums since his death, compared with 10,000 the week before he died. You can be sure Sony will try to capitalize on his newfound popularity with some greatest hits albums in the near future.

• Time Warner (NYSE: TWX): With the vast amount of media coverage that the story is attracting, detailing every morsel of Jackson’s life and death, one outlet is emerging from the hungry pack.

Already a well-established site for entertainment news, celebrity gossip and video, the death of the greatest entertainer since Elvis has launched TMZ.com into the stratosphere. Mainstream outlets like CNN and Fox credited TMZ with breaking the story of Jackson’s death.

TMZ is a joint venture between two TWX divisions, AOL and Telepictures Productions. Anyone looking for this type of news now has to consider TMZ the go-to website. And over the past three months, page views have jumped more than 26%, in large part due to the spike in Michael Jackson traffic just in the past few weeks.

In short, while it might be difficult to play this news directly, companies with exposure to Michael Jackson’s popularity could see a bump in revenue.

Hoping your longs go up and your shorts go down.

Marc Lichtenfeld

Source: How the Michael Jackson Story Impacts Investors

The widespread acceptance of the Internet has lead to a monumental shift in the way we do almost everything. Communication now happens instantly across thousands of miles, e-commerce has generated billions of dollars for companies like Amazon.com (NASDAQ:AMZN) and eBay (NASDAQ:EBAY), and, with the advent of search technologies like Google (NASDAQ:GOOG), the planet’s information is at our fingertips.

But in spite of these advances, something was missing…

After all, why should you have to scour pages and pages of Google results to find out which country is the world’s 5th smallest exporter? How is it that that sort of factual information isn’t readily available? In the past, search technologies had a big limitation – they required you to ask a question that’s already been asked and answered. But on May 15, with the public release of Wolfram Alpha, that all changed.

Wolfram Alpha is a computational knowledge engine. What that means is it answers factual questions based on structured databases that catalogue information. And it’s creating quite a stir among technology experts.

“[Wolfram Alpha] doesn’t simply return documents that (might) contain the answers, like Google does, and it isn’t just a giant database of knowledge, like the Wikipedia. It doesn’t simply parse natural language and then use that to retrieve documents… Instead, Wolfram Alpha actually computes the answers to a wide range of questions,” said Nova Spivak in an article posted on Twine, a social networking site.

So, if you really do want to know what the 5th smallest exporter nation is, or the average salary of a school bus driver, or what 20/200 vision looks like, with Wolfram Alpha the answer is truly only one click away… without having to rummage through search results.

Not a Search Engine

The most critical thing to remember about Wolfram Alpha is that it’s not a search engine – it’s an answer engine. While searching for “penny stocks” will yield you 5.7 million results on Google, Wolfram Alpha won’t return a single web page. Where Wolfram shines is in answering factual questions (asking subjective questions like “which car is cooler” won’t get you much success).

So, enter something like “What is the circulation of the Wall Street Journal?” or “What is the density of milk?” and you’ll get your answer (2.012 million readers and 242 g/cup respectively).

The most important thing about Wolfram Alpha isn’t what it’s capable of right now, it’s how the unique way it handles data makes big advances possible in the future. “Where Google is a system for finding things that we as a civilization collectively publish, Wolfram Alpha is for computing answers to questions about what we as a civilization collectively know.

It’s the next step in the distribution of knowledge and intelligence around the world — a new leap in the intelligence of our collective ‘Global Brain.’ And like any big next-step, Wolfram Alpha works in a new way — it computes answers instead of just looking them up,” explains Spivak.

Putting Wolfram Alpha to Work for You

And as an investor, Wolfram Alpha has some abilities that transcend the potential of its technologies. With this platform, you can instantly get a slew of financial information on a stock just by typing its ticker into Wolfram’s engine.

You can also make interesting computations on the fly, like this chart of GM revenues divided by Ford’s revenues:

If you’re interested in options, bonds, or currencies, Wolfram Alpha also has the ability to make complex calculations (like the value of a straddle option) instantly for you.

Keeping an Eye on the Future

There’s little question that the work the folks at Wolfram Research are doing on Wolfram Alpha is going to change the way we interact with data. I think it’s clear that those changes are going to trickle down to make data more available to investors – and they’re also going to fuel huge growth for the handful of companies who are working on computational engine technologies. Visit wolframalpha.com to check out this amazing new technology for yourself.

Unfortunately for us Wolfram Research is a privately held company, but there are other plays in the field. We’ll keep you posted as they make their moves.

Cheers,
Jonas Elmerraji

Source: Get a Glimpse at the Next Google

• Ford Motor Co. (NYSE: F) said it yesterday (Wednesday) that it will invest $550 million to build smaller cars and an electric vehicle in Michigan. The investment will “support” about 3,200 jobs in the Michigan, and will be followed by production of a battery-electric vehicle in 2011, Reuters reported.

• A report from ADP Employer Services showed that U.S. companies cut about 491,000 workers from payrolls in April. The figure was lower than economists’ forecast and the lowest total monthly job losses since October, Bloomberg reported.

• General Motors Corp.- (NYSE: GM) owned Saab Automobile said it would welcome takeover talks with Italy’s Fiat SpA (OTC ADR: FIATY). Saab spokesman Eric Geers told Reuters that Fiat isn’t among the Saab’s 10 suitors, but “if Fiat comes into the picture, we would welcome a dialogue.”

• Building permits in Canada surged 24% in March, exceeding expectations by 10 times and breaking a five-month decline, Bloomberg reported. The total value of the permits issued by municipalities rose to $3.8 billion (C$4.5 billion), the biggest monthly gain since March 2007.

• The CEO of eBay Inc. (NASDAQ: EBAY) said yesterday (Wednesday) that $2 billion would be a low valuation for Skype.  San Jose-based eBay wants to spin off the Internet phone call company through an initial public offering by the first half of 2010. Analysts have valued Skype at around $2 billion, lower than the $2.6 billion eBay paid for it in 2005. Chief Executive Officer John Donahoe said: “I think that’s low,” when asked at a retail conference in Barcelona about a $2 billion tag, Reuters reported.

• Hertz Global Holdings, Inc. (NYSE: HTZ), the largest U.S. car-rental company, said it’s talking with two automakers to cut a lease deal this year that would help restock inventory and reduce the need for $5 billion in fleet financing next year. The company is trying to lease as much as 20% of its U.S. cars with the goal of cutting fleet financing costs by not taking title of the vehicles, leaving the inventory on the carmakers balance sheets. Credit markets are currently closed to rental-car companies, Chief Executive Officer Mark Frissora told Bloomberg.




• Crude oil prices topped $56 a barrel on Wednesday, as a surprise drop in U.S. gasoline supplies and a slowdown in private sector job losses in April boosted hopes for a turnaround in the economy. U.S. light crude for June delivery rose $2.44 reaching $56.47 a barrel in New York trading. Brent crude climbed $2.02 to $56.14, Reuters reported.

• Eddie Bauer Holdings Inc. (NASDAQ: EBHI), which opened its first sporting goods store in Seattle in 1920, is in talks with potential buyers including Gordon Brothers Group and Hilco Consumer Capital LLC, Bloomberg reported, citing people with knowledge of the discussions. The outdoor-clothing chain operates about 370 stores in the U.S. and Canada. Eddie Bauer has a market value of about $21 million after the stock dropped more than 80% in Nasdaq Stock Market trading during the past 12 months. The company has reported annual losses for the past three years.

Investment News Briefs Thursday, May 7, 2009

• In its latest global outlook, the International Monetary Fund (IMF) slashed the growth forecast for every major country and urged more recovery actions. The IMF said the global economy will likely contract 1.3% this year and post a 1.9% gain next year, Reuters reported.

• Mercatto Estrategia FI, a Brazilian hedge fund that is beating 97% of its peers, is selling assets of the country’s largest homebuilders and banks, saying they are overvalued, Bloomberg reported. “Since we’ve lived through a liquidity crisis, it shook up the economy a lot and there have been huge declines in healthy names,” Regis Abreu, the head of equity at Mercatto, told Bloomberg.

• Prices of U.S. single-family houses rose a seasonally adjusted 0.7% in February, the Federal Housing Financing Agency (FHFA) said. The FHFA’s index is calculated by purchase prices of houses financed with mortgages sold or guaranteed by Fannie Mae (FNM) and Freddie Mac (FRE), Reuters reported.

• Home prices in Dubai could sink as much as 70% from their peak values late last year on sour demand and a halt in mortgage lending, UBS AG (UBS) said in a report. “We are still in relatively early stages of the property down-cycle in United Arab Emirates,” Saud Masud, a Dubai-based analyst at the Swiss bank, wrote in a report to clients, Bloomberg reported. “We believe risk-reward profiles are not yet compelling for investors to consider market re-entry, hence continued price declines are expected.”

• Apple Inc. (AAPL) reported second-quarter profit and sales that exceeded analysts’ estimates. Apple’s iPhones and new iPod models helped spur sales of $8.16 billion that yielded net income that amounted to $1.21 billion, or $1.33 a share, in the period which ended March 28 Apple said today in a statement. Analysts predicted profit of $1.08 a share and sales of $7.95 billion, according to a Bloomberg survey.

• Agents with the Pentagon’s Defense Criminal Investigative Service searched the Malvern, PA offices of a unit of Germany’s Siemens AG (ADR:SI) on Wednesday.  The search was part of an ongoing investigation, a Pentagon spokesman said.  Ed Bradley, special agent in charge, said the search began early on Wednesday and continued throughout the day, but he gave no details on the nature of the investigation, according to Reuters.
• David Kellermann, the acting Chief Financial Officer at Freddie Mac (FRE), was found dead early Wednesday in the basement of his home in a Washington suburb, police said. Early reports from sources in the police department indicated Kellermann’s wife reported a suicide. There were no signs of foul play, and the death is under investigation, Fairfax County, Virginia, Police Officer Shelley Broderick told Bloomberg. The medical examiner’s office said it’s conducting an autopsy.

• In a sign that efforts to overhaul its main auction and fixed-price retail site may be working, EBay Inc. (EBAY) reported sales and profit that beat analysts’ estimates, Bloomberg reported. The most-visited U.S. e-commerce site said net income was $357.1 million, or 28 cents a share, compared with $459.7 million, or 34 cents, a year earlier.  Excluding some items, earnings were 39 cents a share, beating the 34-cent estimate by analysts.

Source: Global Investment News Briefs Thursday April 23, 2009

Platinum peaked in Hong Kong at $1130, declined into an $1115-1125 range, and stayed there for the rest of the day, ending at $1125/oz., up $12. Overnight, platinum has been flat.

Silver noodled along little changed until the second hour in New York, when it bumped up about 15 cents, to $13.25, but then it hit an abrupt and savage waterfall decline that shoved it all the way down to $12.60, after which it was able to cut some but not all of its losses, as it clawed back to a close at $12.97/oz., still down 9 cents. Overnight, silver is little changed. (Click here for charts)

In the real world, it was a mixed day for the precious metals, as gold and platinum eked out gains but silver was whacked on the head like poor Wile E. Coyote. Gold fanciers surely hoped for a better result as the dollar weakened and oil staged a bit of a comeback, but it was not to be.

What to make of silver. It continues to struggle in the face of enormous physical demand from investors. The U.S. Mint has released its quarterly figures, and in 1Q09 it stamped out a staggering 7,157,000 1 oz. Eagles. Folks, that is a lot. It took 222.6 metric tons of silver to make that many coins. In the past, there have been whole years in which the mint didn’t produce as many.

Here’s the odd thing. Despite this massive infusion of Eagles into the market, they’re still hard to find. Demand remains so high that dealers, such as our own Kitco, are charging an average of around 35% over spot for the things. And expect shipment delays, Kitco warns on its own website.

On eBay (NASDAQ:EBAY), our purest free market trading platform, the situation is even more frantic, with buyers willing to pay, in some instances, more than 50% over spot to land a roll of 20 Eagles.

That’s no joke. So what on earth is going on here? Obviously, the paper-controlled Comex silver price is completely out of synch with the action on the ground. If you can afford it, the smart move would seem to be to buy a silver contract on the Comex (5,000 ounces) and stand for delivery.

Source: Precious Metals Mixed

“Right now, given the concerns that we have over the size of this package and all of the spending in this package, we don’t think it’s going to work,” Rep. Boehner said yesterday (Sunday) on NBC-TV’s “Meet the Press.” “And so if it’s the plan that I see today, put me down in the ‘No’ column.”

The plan – detailed in a Money Morning report last week – could potentially pass the Democrat-dominated House without Republican support, The New York Times reported. But the stimulus plan will face major opposition when it comes before the U.S. Senate, U.S. Sen. John McCain, R-Ariz., told “Fox News Sunday.”

If at least two Republicans don’t approve the bill, the proposal won’t be able to achieve the majority vote of 60 it needs to be filibuster-proof. McCain said he also plans to vote “No” unless the stimulus bill is changed.

“We need to make tax cuts permanent, and we need to make a commitment that there’ll be no new taxes,” McCain said. “We need to cut payroll taxes. We need to cut business taxes.”

Added McCain: “We need to have a commitment that after a couple of quarters of [gross domestic product] growth that we will embark on a path to reduce spending to get our budget in balance.”

McCain lost the November presidential election to Obama.

That’s not all that’s taking place in what figures to be a busy stretch this week.

The economic calendar will heat up this week as economists get their initial look at U.S. gross domestic product (GDP) data for the 2008 fourth quarter. Needless to say, the results are not expected to be pretty, with analysts predicting a 5% contraction during that final three months of the year.

The report is due out Friday.

The United States has already been in a recession for a year, the National Bureau of Economic Research (NBER) reported in early December. This downturn – and the bigger-than-usual job cuts that have resulted – could generate a much-bigger financial crisis “aftershock” than many experts realize. Only two of the last 10 recessions to take place since the Great Depression have lasted a full year. But this one could last well into 2010, many economists fear.

The U.S. economy shrank 0.5% in the third quarter, marking the slowing pace since 2001 and continuing a still deepening recession that has wrung the markets since last year. GDP advanced 0.9% in the first quarter of last year and 2.8% in the second quarter, Bloomberg News reported.
Dana Saporta, an economist at Dresdner Kleinwort Ltd. in New York, told Bloomberg projects a 5.4% overall contraction in the fourth quarter. Analysts expect the malaise to carry over well into this year.

The stimulus packages – money spent by the newly departed Bush administration, as well as one planned by the newly installed President Barack Obama – will have a lot to say about how long the U.S. economy stays down. As the Republican opposition comments demonstrate, with Congress (the Democratic members, at least) promising a stimulus package by President’s Day (February 16th), Obama will have his hands full initiating some “give and take” from the dissenters of the current plan.

On Wednesday, U.S. Federal Reserve Chairman Ben S. Bernanke also leads the first Fed policy meeting of the Obama administration though he and his policymaking cohorts have no more wiggle room when it comes to cuts in the benchmark Federal Fed rate.

But the Fed statement should provide insight into the additional measures the central bank has in its arsenal to help jumpstart the economy.

Earnings season also moves forward with energy companies prepared to show the ill-effects of the drop in oil prices.  Exxon-Mobil Corp. (XOM) and Chevron Corp. (CVX) announce late in the week, as does consumer products giant Procter & Gamble Co. (PG).  Amazon.com Inc. (AMZN) also reports quarterly earnings during the week and analysts are speculating whether investors will cheer its results a la Google Inc. (GOOG) or frown along the lines of eBay Inc. (EBAY).

Market Matters

Last Tuesday, Barack Obama took the oath of office (for the first time) and became the 44th president of the United States.  In his inaugural address, President Obama called for “action, bold and swift – not only to create new jobs, but to lay a new foundation for growth.” He then acted “boldly and swiftly” by freezing the pay of high-ranking members of his administration.  One of those potential members, U.S. Treasury Secretary-nominee Tim Geithner, faced the wrath of Congress for his role in the mis-handling of the banking bailout plan and for his failure to pay a mere $34,000 in taxes.  Since the treasury secretary oversees the Internal Revenue Service, certain “rule sticklers” in Congress frowned upon his “careless mistakes.”  Still, he was approved by the Senate Finance Committee and is expected to be confirmed – just in time to oversee the distribution of that next round of Troubled Assets Relief Program (TARP) money.

While Obama begins a new job and tries to “faithfully execute the office” (rather “execute the office faithfully”), a few financial execs are headed for the unemployment line.  John Thain, formerly of Merrill Lynch & Co. Inc. fame/infamy, stepped down or was forced out from his role at Bank of America Corp. (BAC) after failing to disclose dramatic losses prior to the shareholder approved acquisition.

In an effort to stop the negativity – and no doubt to try and protect his own job – BofA Chief Executive Officer Kenneth D. Lewis and several cronies bought more than 500,000 company shares, a move that earned a collective yawn from investors.

Citigroup Inc. (C) will be replacing Chairman Win Bischoff with ex-Time Warner Inc. (TWX) CEO Richard Parsons, and also announced its intent to sell Japan’s Nikko Cordial Securities, a move that confirms that brokerage will no longer be considered a core business.  In other financial news, State Street Corp. (STT) reported a far-worse-than-expected quarter from its asset management business; U.S. Bancorp (USB) announced that profits fell to the lowest level since 2001; Capital One Financial Corp. (COF) posted a huge loss in the quarter and predicted that credit card defaults will only grow in 2009.

Across the pond, Royal Bank of Scotland Group PLC (ADR: RBS) forecast an annual loss above $40 billion which would be the largest ever reported in the United Kingdom.  On the heels of that news, the British government introduced new measures to its bailout plan, including a form of insurance to limit future loan losses.  Investors were hoping that earnings from non-financials would fare better, but Microsoft Corp. (MSFT), eBay, General Electric Co. (GE), Advanced Micro Devices Inc. (AMD) and Xerox Corp. (XRX), among others, disappointed with weak results as well (though Google and Apple offered some bright spots).  Time Warner, Intel Corp. (INTC), and Clear Channel (among others) announced layoffs, proving that most sectors of the economy are hurting.  Non-government arranged deals still exist as Pfizer Inc. (PFE) attempts to acquire pharmaceutical rival Wyeth (WYE) and Mexican billionaire Carlos Slim. Carlos Slim plans to invest $250 million into The New York Times Co. (NYT), The New York Times reported.

Economically Speaking

A rather slow week on the economic calendar last week allowed investors time to focus on the earnings data.  Housing starts fell for the sixth straight month and building permits, a predictor of future activity, dropped to the lowest level ever reported.

The never-ending layoff announcements continued to hinder the labor picture as jobless claims surged far more than expected.  In China, GDP rose by 6.8% in the fourth quarter, a number that would have prompted parades in this country. In China, however, those numbers confirm dramatic slowdowns in the world’s third-largest economy.

The “weak” report means that growth for all of 2008 came in as 9%, the first year since 2002 that China’s growth rate fell below double-digits.

Weekly Economic Calendar

Source: Financial Crisis Challenges Escalate as Republicans Announce Plans to Oppose $825 Billion Obama Stimulus

But that is old news.  You are here because you want a forward outlook, not a rehashing of what happened last week.  But I bring up the major earnings from the past week to make a point.  The expectations for Alcoa (NYSE:AA) were still relatively high and they dropped sharply.  Expectations for J.P. Morgan were pretty low and they beat, but got taken down by the industry (guilt by association).  Intel warned, came in at expectations and jumped three percent the next morning.

The point is that earnings reports boil down to one thing: EXPECTATIONS.  Looking at the expectations for this season, due to the current economic crisis, overall expectations are much lower than in recent quarters.

This week we have a number of big tech stocks reporting and the expectations are definitely coming down.  Just to put it into perspective, I made the following table that shows the companies reporting and the current consensus estimate for earnings this quarter.  I have also included the estimates from 30 days ago as well as the estimates from 90 days ago.

As you can see, the expectations have declined sharply in the last 90 days.  Have they come down enough?  That remains to be seen and it will likely be case dependent.

If you look at the analysts rankings on these five stocks, the analysts love Google (NASDAQ:GOOG), Apple and IBM.  They hate AMD and EBay.

So the two of the five that stand the best chance of beating estimates are AMD and EBay.  This doesn’t mean you should rush out and buy them before earnings are announced, but should these two beat estimates, they have the best chance to move sharply higher.  Thanks to the negative sentiment toward them.

Earnings are a tough thing to play, but if you do your homework—looking at analysts’ rankings, short interest ratios, put/call ratios—you can tilt the odds in your favor.  I recommend to most people that they wait until after the earnings are announced, but if you insist on getting in ahead of the report, do it with options (lower cost of entry) and make small allocations to the trades.

I don’t make earnings plays in my K.I.S.S. Service, but I do occasionally have a trade on when earnings come out.  I almost always take profits off the table before the earnings report comes out and leave a little exposure so that if the stock goes my way, I can really juice my gains.  Meanwhile, if the stock goes against me, the pain is negligible because of taking profits off the table on a portion of the trade.

Good luck and good trading,

Rick

Source: Earnings Season Ramps Up This Week; Expectations Are Considerably Lower