Archive for October, 2009
BAC Negative Surprise
* -$0.26 vs. -$0.13 EPS LPS
* Large and incensing provisions, but lower than at JPM
Citi looks even worse after this.
Press release.
Just Buy
A wave of reckless optimism has taken over the financial world. We saw new highs in U.S. equities yesterday and European today. As I wrote before “better taken expected” has taken over the investor hart and souls. It doesn’t feel rational for me so I will pass on being long for the time being.
Banking Analyst Interview
Nice introduction to bank stock analysis. Street Capitalist link: My Interview with the Bank Analyst.
U.S. Retail Sales
Just to touch briefly yesterdays retail sales. The figure was -1.5%; 0.5% ex autos vs. -2.1% and 0.3% consensus. Prior readings were 2.7% and 1.1%. Nothing to cheer here, most important aspect for me is the consequences of government stimulus withdrawal. The additional demand just evaporates.
Charts
Interesting action with the VIX yesterday, break out to the 52 weeks low and then rebound to the upside. Looks someone was buying insurance after the run yesterday.
JP Morgan Chase & Co Earnings
EPS of $0.82 vs. $0.51 consensus. Main contribution came from fixed income revenues; half of the net income coming from investment banking; retail services & credit card divisions suffering. Earnings presentation.
Solid performance; excellent capital ratios.
China’s Export Decline Slows
hina’s export decline slowed to 15.2% YoY in September from 23.4% in August and 21% consensus. Positive surprise, but still far away from +25% pre-crisis levels. As usual equities and commodities are trading higher on the news; U.S. dolar lower.
Intel Earnings
The earnings announcement stream continues. Intel posted EPS of $0.33 vs $0.28 consensus. Revenue at $9.4 billion down 7.8% compared with the same period last year. The consensus was at $9.06 billion. More from Reuters: Intel quarterly results beat Street. The earnings season is proving to be what I wrote earlier “better than expected” earnings on cost cutting. It can’t go on indefinitely, we have to see some growth in revenue.
Nervous
Markets are feeling nervous, I’m feeling nervous. VIX is at the lower bottom of the short term range, it looks it could stay in the range. Gold is hitting new highs today, it’s overbought a little, maybe some consolidation there needed if it is bound to stay at today’s levels.
Wolfram Alpha
Nice finance tools on Wolfram Alpha. Wolfram alpha blog link: Computing Stock Data in Real Time. Idea for this post came from one of my favorite blogs The Big Picture Blog by Barry Ritholtz.
Week Of Earnings Announcements
This week could definitively determine the route U.S. equities are going to take. Tuesday: Procter & Gamble and Intel; Wednesday: JP Morgan, Thursday: Goldman Sachs and Citigroup; Friday: Bank of America and General Electric. I suspect banks will report something similar to previous quarter; but the market impact would not be so profound. I still believe that the banking crisis will have round two, but not at this moment, probably in few quarters. Interesting Bloomberg article today on bank earnings composition. Bloomberg story: Writedowns on Mortgage Servicing Make Even JPMorgan Vulnerable . We will see when the reality catches up with accounting.
Valuations
Noting much on the news front today. Mr. Bernanke speech yesterday stirred up the markets sending U.S. dollar up, and treasuries down. The rhetoric is unchanged, the highlight is that the FED is ready to tighten the monetary policy when the economy starts to recover. Bloomberg link: Bernanke Ready to Tighten When Recovery Sufficient.
Declining Dollar
Lots of attention today to the declining dollar. Interesting article on that theme in the WSJ by David Malpass from the Encima Global LLC. WSJ link: The Weak-Dollar Threat to Prosperity.
Plain Vanilla”Better Than Expected”
As expected equity markets got a nice push up from Alcoa earnings. Looks like the earnings season will probably have similar “better than expected” flavor like the one preceding.The market looks bound to new highs.
The news flow on consumer and credit card credit continues to throw shadows on this equity rally. Consumer credit shrank for the seventh month in a row, contracting 12 billion USD in August to 2.46 trillion USD implying -5.8% annual growth rate. Credit-card debt fell for a record 11th straight month, down 9.9 billion USD. Shrinking at annualized rate of 13.1%. The credit outstanding ended at 899.4 billion USD. This could pose important set back to the recovery of U.S. economy as it shows the lenders are reluctant to extend credit to the economy and consumers are keen to reduce its debt. Consumer credit press release. I will post again the Meredith Whitney article explaining the issue in detail. WSJ story: The Credit Crunch Continues