4/17/12…Best Buy…or Best Short?

Bloomberg  Daily Quaote: “Can  you imagine what I would do if I could do all I can?- Sun Tsu

 

TB’s Quote of the Day: Rep. Elijah Cummings (D., Md.), the top Democrat on the House panel, said those (in the GSA), responsible for the spending had “disregarded one of the most basic tenets of public service: ‘It’s not your money, it’s the taxpayers money.’ “

…see that’s the difference between an employee and a congressman, the latter take lobbyists money – not the taxpayers, then use it against us!! TB

 

Bloomberg Top Stories:

*Stocks Climb for Second Day in Europe as Spanish Bonds Rally on Debt Sale

*Spain Sells More Bills Than Planned With Borrowing Costs Rising at Auction; 2.623% 1 yr!

*European Union is Said to Sell 26*Year Bonds to Finance Portugal Bailout – once again!

*German Investor Confidence Unexpectedly Climbs to Two-Year High – Sehr Guht!

*Investors Halt Restructuring of First Europe Defaulted Mortgage Securities

*Dimon Widens Gap With JPMorgan Bankers as Wall Street Compensation Tumbles – hmmm

*State Street First-Quarter Profit Falls 6.6% on Interest Rates Near Lows

*U.S. Bancorp Beats Estimates as Profit Rise3s on Improved Lending; Increases dividend 56%!

*Coca-Cola Earnings 89c vs 87c consensus as Sales Rise Worldwide – things go better with…

*Goldman Sachs Increases Dividend as First-Quarter Earnings Beat Estimates

*Freeport-McMoRan Takeover Talk Intensifies With Lowest Valuation

*Lowe’s Builds Stock Rewards on a Foundation of Leverage – selling $2B of bonds??? BAD!

(Stock  selling near 2007 and they want to do buybacks? You have to be kidding! TB)

*Merkel offers Spain No Respite as Debt Cuts Seen Key to Election Campaign 

*Fernandez Mimics Chavez as YPF Seizure Raises Risk of Argentina Isolation

(Don’t cry for me, Argentina, the truth is we never liked you…or is that Venezuela?)

 

To call yesterday a ‘mixed session’ would be too kind. Dow was up but…see above.While the Dow  was up 0.7% (along with Transports +0.9% and Utilities +0.6% (lagging and a strange bedfellow), the session high was 12986 EXACTLY a triple top and producing formidable resistance before Dow 13k can be realized! Also resistance below and above the psychological 13k: 12998, the 50 day m/a and 13033, the 40 day, so even broaching the magic number could be fleeting. Big Caution Flags!  S&P was essentially flat due to Apple diving. And had also come back to or near the 40/50 day moving averages which were highly vulnerable to a technical correction, especially with this Friday’s options expiry. Volume was slightly lower for a FOURTH day at 3.43B shares vs 3.47B shares on NYSE listed stocks (compare to 4.66B on Tuesday’s downdraft). NYSE stocks executed on the Big Board fell to the lowest level in six sessions, 735M shares from 771M after the surge to 972M on Tuesday’s selloff, still 200M below the falling 12 month average (971M)! 6 of the last 7 sessions have been less than 800M shares! Since 2/29 there have now been just THREE ‘average’ days, including 3/16’s high for 2012, and the average has fallen to 808M shares. Since 11/1 there have been just eight 1B share days…only three in 2012! Since 2/6 there have been FIVE sessions less than 700M shares. 102 of the last 112 sessions have been less than the 12 month average! Advance/Declines were barely positive: +1.3x vs +-3.3x vs 4.6x vs +3.8x vs -5.8x!!! on NYSE and +1.1x vs -3.5x vs +2.1x vs +3.6x vs -4.5x! on Nasdaq. Breadth was weak and MIXED: +1.2x vs -6.4x! vs  +9.5x!!! vs +3.7x vs -12.9x!!! on NYSE and +1.4x!!! vs -6.4x vs +4.5x vs  +4.3x vs -11.7x!!! vs -5.2x on Nasdaq. New 52 week highs dipped slightly: 119  vs 103 (high was 420 on 3/26), while new lows rose to 117 vs 76! More importantly they were EQUAL! It never was very far from even: 1-1 vs  -2.9x vs +3x vs 1:1 vs -3x!!! vs -2x. The S&P VIX in another rare instance was unchanged at  19.55, after bouncing back from 17.20 and above the near convergence of the 40/50 day m/a’s (16.95-17.33) after gapping up Tuesday with a high of 21.06, highest since March 6! March 16’s intraday low of 13.66 was lowest since 6/20/07’s 12.75!!!

 

Here are the results of the last nine sessions: Dow UP 0.6% vs -1.1% vs +1.4% vs +0.7% vs -1.7% vs -1% vs -0.1% vs -1%! vs -0.5%; Transports +0.9% vs -1% vs +2.2% vs +0.9% vs -2.1% vs -1.7% vs +0.2% vs -0.4% vs -0.2%; Dow Utilities +0.6% vs -0.3% vs +0.5% vs +0.3% vs -1.3% vs -0.6% vs -0.5% vs  flat vs flat; S&P 500 -0.1% vs -1.3% vs +1.4% vs +0.7% vs -1.7% vs -1.1% vs -0.1% vs -1% vs -0.4%; Nasdaq Composite -0.8% vs -1.5% vs +1.3% vs +0.8% vs -1.8% vs -1.1% vs +0.4% vs -1.5%! vs -0.2%; Nasdaq 100 -1.1% vs -1.5% vs +1.2% vs +0.5% vs -1.6% vs -0.8% vs +0.6% vs -1.4% vs -0.1%; Russell 2000 P0.2%? vs -1.5% vs +1.5% vs +1.6% vs -2.4%!!!! vs -1.8%!!! vs -0.3% vs -1.7%!!! vs -0.7%; NYSE Financials +0.6% vs +1.9% vs +1.6% vs -2.2%!! vs -1.4%! vs -0.3% vs -1.6%!!! vs -1%. NYSE Financial Leaders: BAC +1.3% vs -5.3%!!! vs +3.4% vs +3.8% vs -4.4%!!! vs -3.3%!! vs +0.3% vs -3.1%!! vs -2%! JPM +0.3% vs -3.6%; WFC +0.9% vs -3.5%? Citi +1.8% vs -3.5% and since peaking at $38.40 on 3/19, it is now off 11.5%!!!

 

European equities strong, Asia still weak ex-India:  FTSE +0.8% vs +0.3% vs -0.4% vs -0.3% vs +0.7%; CAC40 +1.4% vs +0.6% vs -1.1% vs -0.5% vs +1.4%; DAX +1.2% vs +0.3% vs -0.9% vs -0.1% vs +1.5%; Nikkei -0.1% vs -1.7%! vs +1.2%! vs +0.7% vs -0.8%; Hang Seng -0.2% vs -0.4% vs +1.8%!! vs +0.9% vs -1.1%; Korean KOSPI -0.4% vs -0.8% vs +1.2% vs -0.4% vs closed; Indian Sensex UP 1.2% vs+0.3% vs -1.4% vs +0.8% vs -0.3% vs +0.1%. U.S. stocks futures better: DOW +59; SPX +6.60; NDQ +8.50. Bonds slipping with 10’s at 2% and 30’s still well above 3%.10 yr 2.00% -1/8, RECORD low 9/23 of 1.6855%; 30 yr 3.15 -5/16; Long TIP 0.75% -5/16. It was 0.57% at high. The 5 yr TIP yields MINUS 1.31%; 10 yr -.28%. Bills 0.06% 1 month; 0.08% 3 months, 6 months 0.13%. Reverse Repo 0.28%. 3 mo. Libor 0.47%, and 0.73%; steady. New section on euro sovereign 10 years, for reference Germany 1.75% +4 bp’s (benchmark for the matrix); Italy 5.45% -12; Spain 5.84% -18; Greece 20.33% +18; Portugal 12.04% flat; Ireland 6.64% flat.

Gold closed below $1700 for a 24th straight session, falling $15, making the hit $142 since 2/28, closing $1649.70 -$15.50. 2/28’s $1792.70 intraday high was not seen since 11/16! It has been above $1600 since Jan. 31, which remains below major support!!! The record high is $1923.70, a buying climax on 9/6. Res is $1690, the 40 day and $1699, the 200 day, then $1697, the 50 day. It is now $1655.00 +$5.30. Crude little changed, closing at $102.93 +.10. Tuesday’s low of $100.68 was worst since 2/15/12! It remains well below the range of $105-110 which had held since 2/21!!! RES still at the 50 day (104.35), the 40 day (105.53), and major support at $95.85, the 200 day, all still rising. Better overnight, now $103.66 +.73. $101.08, the April 4 low is still minor support – Last 4/10’s low $100.68!!! – lowest since 2/15/12!.

 

 

As for Dow 13000, it peaked at 12986 on Friday, and yesterday created a rare ‘TRIPLE top’ which means HEAVY resistance! So disregard the white noise of being up 0.7% yesterday. 24 of the members were up – true industrials while five of the six down were consumer related (MCD, DIS) or tech (HPQ, CSCO, IBM), Boeing the only other. Exxon led the way up 8, followed closely by Travelers and PG, with CAT, WMT, CVX, HD, MMM, DD, AXP, KO, JNJ, INTC, and MSFT all up more than two points. Transports were the big gainer +0.9% followed by the lagging Utilities +0.6%. From there it got ugly as the S&P 500 was about unched, -0.1%, both Nasdaq indices slaughtered, thank you Apple, while the Russell 2000 managed to eke out a 0.2% gain but like the others was off 1.5% on Friday. NYSE Financials rose 0.6% but that was after being Friday’s worst performer, -2.2%, gaining back just 0.6%. All in all a bad day and worse than it appeared. This could be the beginning of a major selloff. Friday still options expiry!

 

Speaking of major selloff’s, Apple has been down for the past FIVE sessions, after peaking at $644 on 4/10, then closing down $8 from the prior day’s high, thus ending the rally that began on 3713 – gapping up two straight days and producing one third of the quarter’s gain (16%/48%), without which the market would not have glistened so much in the first quarter. Now we have to worry about earnings…including Apple’s as the analysts are looking for much more. Apple the victim of managers trying to shove in the stock for window dressing…eye candy for their clients…always a bad idea, but…

 

The VIX was unchanged yesterday at 19.55, strange, given Friday’s surge that nearly cancelled Thursday’s big 2.82 drop to17.20 – about neutral. This is likely a function of Friday’s coming options expiration. Last Tuesday’s intraday high of 21.06 – was highest since March 6 but that was before the quarterend rally and TB is even more convinced that no rational manager wants to add to positions this early in the quarter, especially when lagging due to not holding Apple, or being foolish enough to buy it in the final week of the quarter for window dressing! But…ya never know, do you?

 

TB still recommends either staying sidelined but is increasing the need for setting trailing stops in volatile stocks.

 

 

. . .   – – –  . . .  (SOS)   . . .   – – –  . . .  (SOS)   . . .   – – –  . . .  (SOS)   . . .   – – –  . . .  (SOS)

 

 

…ah, Best Buy or Best Short or Worst Buy. Do not understate what is happening here, despite the fact that the media has failed to see it, with the lone exception of the Minneapolis Star Tribune, and a minor piece in the SF Chron.

 

According to the Chron, two of the stores are in East Palo Alto, which, despite its being smack in the middle of Silicon Valley has not shared in the benefits and has an unemployment rate of 17.1%. Another in Pittsburg, Ca, with an unemployment rate of 15.2%. The other Northern California store is in Manteca with 13.9% unemployed. Toll for the four stores: 400 lost jobs. Remember they are closing FIFTY stores and spending $800,000 on retraining employees while adding more smaller stores. Also, according to engadget.com they plan to close the remaining FORTY TWO stores by May 12th! Make sense? Still no word from the company on how many will be axed, but by extrapolation that is a total of 5,000 employees plus the 400 at headquarters, and $800 million in expense, which does not include opening 100 smaller stores!

 

But wait, it gets better…not only have they missed estimates for six consecutive quarters, but after Brian Dunn took the helm Best Buy’s stock is off 35%. Still they gave CEO Brian Dunn an 11% raise, expressed confidence in him, and embarked on a major reorganization, then three days later tell us they are in a ‘personal conduct’ investigation of him. How could this happen? How could a man selected by the Chairman/founder, Richard M. Schulze, go this far astray. It was disclosed that he had an affair with a 29 year old employee (a la HP’s Mark Hurd), but then they hired to attorney’s with strong investigative skills, despite saying financial or operational matters weren’t an issue.

 

But having trained under Schulze, it may be that the apple doesn’t fall far from the tree. Consider, Schulze who owns 72 million shares of the company (20% and number one shareholder), has put several family members on the payroll including his daughter ($200k plus and who works mostly from her home in California), son-in-law (nearly $200k), leases at least two stores to the company, and owns Best Jets, a Minneapolis company that provides those services exclusively to Best Buy. In fairness, all of this has been disclosed in company filings. But the board…cronies of Schulze? They didn’t seem to care. After all they were serving the number one shareholder…the others be damned.

 

Equally important are the analysts ratings who must not read the corporate filings. There are still 5 buys, TWENTY holds, and just 4 sells. This despite the fact that they have been wrong since March 2011. This is why sell side (broker) analysts are not worth reading. They are paid to sell product and to convince companies to do more business with them, not protect you. If you didn’t learn that during the dotcom boom/bust there is no hope for you. Yet the Jobs Act, just signed by President Obama strips investors of protections in allowing analysts to interact with underwriters. It also extends ‘crowdfunding’ which had been mainly used by non-profits but has become popular with the advent of social networking to raise money before IPO’s using conventional broker connections. Obviously, they didn’t pay attention to the Facebook private placement by Goldman, or the false and misleading information provided in the Groupon IPO. There is no investor protection…it has been stripped away. But by whom? You decide, but you know who.

 

Have a great day! Tomorrow, the Volcker Rule, good or bad?

 

TB

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