30 September, 2007

3rd Calendar Quarter Ends, Earnings Season Begins

As a tumultuous 3rd Calendar quarter comes to a close, market volatility grabbed most of the trading headlines as the markets felt the effects of the credit crisis and a Fed induced Rate Cut Rally.

What the end of the quarter brings is wave after wave of Corporate Earnings. The markets have seen earnings from the Financials coming over the last couple of weeks, highlighted by Goldman Sachs (GS) tremendous expectations beat. The first week of October is highlighted by a couple gadget/phone makers as Palm (PALM) reports Monday and Research In Motion (RIMM) reports Thursday. The two smart phone competitors have been going in opposite directions and Palm hopes its latest cheap device can put a dent in the momentum that's been grabbed by the BlackBerry and Apple's (AAPL) iPhone.

Overall the upcoming earnings week is fairly calm as a storm of earnings will come in the last three weeks of October.

27 September, 2007

Markets Rise Modestly Thursday on Subdued Volume while China Stocks Soar

North American market were higher across the board Thursday as Investors were buying cautiously towards the end of the quarter. Many however sat on the sidelines as trading volume was lower across the board than in previous weeks. The Dow, Nasdaq and S&P all saw gains today of about .3%. In Canadian Markets the TSX was up almost triple digits which translated to about .7% in the green.

Google (GOOG) went in front of the Government today to defend its decision to buy DoubleClick. A group of challengers led by Microsoft (MSFT) had complained that this deal would give Google too much power over Internet Advertising. Google's dominance in search ads, coupled with DoubleClick's reporting and distribution services would give Google too much control according to Microsoft. Yes, I understand the irony of Microsoft complaining about Anti-Trust issues hot on the heels of its appeal loss in Europe for the very same infractions. Talk about the Pot calling the Kettle black! Google seems confident enough that the deal would be allowed to go through as it points out that Microsoft had also been in the bidding for DoubleClick and lost, having to settle for competitor aQuantive.

In the airline sector a large order was placed by British Airways (BAIRY). The company leveraged heavy competition between Boeing (BA) and Airbus and took orders from both airplane makers. The Airline placed an order for 12 Airbus A380 planes and 24 Boeing 787s with an option to buy even more planes should needs arise. British Airways climbed almost 5% on the news while Boeing was only slightly higher.

The other continuing big stock growth story is China. Many Chinese based companies have done extremely well this week and the run was capped off today with even more substantial gains. China Eastern Airlines (CEA) was up 15%, China Telecom (CHA) was up 15% and 18% on the week and China BAK Battery (CBAK) was up 19% and has doubled in the last 5 days. Another Chinese mobile/Internet play KongZhong (KONG) was really flying today as the stock jumped 72% rebounding from year-lows recently.

While its tempting to jump in and try to ride more momentum here, caution is the name of the game. With these type of gains an cool, calm and collected investor would sit back and see whether the now inflated prices can be sustained going forward to a quick trade. While I would particularly be cautious about the Airline industry, China Telecom is a great play on the expanding mobile world and KongZhong was beaten down from the $10s to the high $3s before rebounding now to $8.50 on inklings of hope and raised estimates. Due to government control and very strict laws the Chinese business world is one not fully understood by a majority of casual investors and as such I don't recommend jumping in blind hoping to catch a wave.

Disclosure: Author is long GOOG and holds no position in any other companies mentioned

26 September, 2007

Markets up Wednesday, Dow gains 99 led by General Motors

American Markets enjoyed another positive day with the Dow Jones finishing to the plus side by 99 points. The big push was provided by General Motors (GM) as it enjoyed a 9% gain. GM and the United Auto Workers Union reached a deal to renew auto worker contracts and restructure GM obligations to workers and the union. The threat of a long-term strike was lifted from the shoulders of GM and the stock jumped accordingly.

Also enjoying positive sentiment were the Investment Banks as Bear Stearns (BSC) jumped over 7% on reports that the big man himself, Warren Buffett is eyeing a stake in the company. These reports went on to say that several big banks are also interested in purchasing as much as 20% of the company. This news had investors feeling pretty good about the potential for these companies, specifically the investment banks, to overcome the losses and the mistakes that were made during the sub-prime credit situation.

In technology stocks, momentum for Research In Motion (RIMM) kept going strong as the company continues to defy gravity and bloated P/E valuations. The rule of 80-leads-to-100 was in full effect for the BlackBerry maker as it hit a high of $100.75 before settling to close at $99/share. Apple (AAPL) this morning opened to an all-time high and continued to $155 before drifting down and closing slightly lower just under $153. The recently opened Amazon (AMZN) DRM-Free MP3 store is making its rounds and while there hasn't been much of an effect on Apple's stock yet the consensus has been that this can emerge as a true competitor to iTunes.

With the quarter coming to a close investors will be keen to be placed in the right companies as the earnings season kicks into high gear.

Disclosure: Author is long AAPL

23 September, 2007

Major Techs hit 52-Week Highs, Can the Rally Continue?

Post Fed Meeting, stocks have been on the upswing with new highs seemingly being made daily. While the market has rallied broadly, will we see a pause or can the ride continue? The Dow still sits about 200 points from its highs, Nasdaq 50 and the S&P about 30. In other words, there are still gains to be made towards the end of the year.

Technology has been on fire lately, as early earnings reports have been positive and multi-national companies are cashing in overseas as the US dollar weakens against other major currencies. Oracle (ORCL) had a great quarter and hit a 52 week high of $22.17 on Friday. It wasn't alone as many major tech players were just at or set new highs at the end of trading on Friday. Those companies included Google (GOOG) at $560, Ebay (EBAY) at $39, Cisco (CSCO) at $32, Amazon (AMZN) at $91, Research In Motion (RIMM) at $93, BIDU (BIDU) at $285.

So what's the trade for Monday and the rest of the year? Success will come to those companies that are getting a majority of their revenue in International currencies. Due to the US Dollar's record decline against the Euro, European business will drive profits this quarter and next. Big Tech is in good shape to continue to rally into the next round of earnings numbers due to and increasing dependence on Worldwide business for accelerated growth.

It's seemed lately that you can toss money into any tech stock and watch it rise, however, to truly pick a winner into the end of the year it's important to stand back and pick apart the business and the stock's valuation and determine which bet is best. It's vital to look at growth projections and current valuations to see that AMZN with a P/E in the 120s and a forward P/E of 51, is a much shakier bet than high growth GOOG or RIMM who sport forward P/E's in the 30 as the latter companies can seemingly growth into P/E's in the 40s and 50s. Steady Oracle and Cisco, who are experiencing revitalized business growth sport forward P/E's around 18, and a strong case can be made that these companies deserve P/E's in the 20s going into next year.

Technology has gotten its spark with the market rally over the last week and this sector will be a good one to be in come Christmas and the last calendar quarter of the year. Investors should take heed and come up with a criteria of which Technology companies should become the best investments. Here's a primer of things to look for when evaluating potential technology investments this holiday season.

1) Which companies will create, advertise, sell or re-sell the upcoming must-have gadgets or be involved in the back end of another record online-shopping season.

2) Determine which companies sport the largest percentage of International business.

3) Determine which companies have the ability to mold into their inflated P/E ratios so that any downside risk can be minimized with strong growth.

Disclosure: Author is long GOOG

20 September, 2007

Goldman Rules the Street again, Earnings top Expectations

Goldman Sachs (GS), the biggest of the Investment Banks, reported earnings on the heels of a Lehman Brothers (LEH) beat and a Morgan Stanley (MS) fall, and did it ever show who rules Wall Street. Goldman reported earnings of $6.13/share versus the average estimate of $4.35 and a high estimate of $5.08. Now that's an earnings beat!

Goldman was all over the headlines during the sub-prime meltdown for its flagship Alpha Fund and its negative performance, but the trading giant turned around those losses and made a killing betting against mortgages. The results, net income of $2.85Billion, a 79% increase, revenue of $12.3Billion, a 63% increase, and the undoubted respect of Wall Street.

Bear Stearns (BSC) did not fare as well, seeing earnings slide 61% year over year. Morgan Stanley saw declines also. Goldman showcased its ability to react to trouble and create investment opportunities out of volatility and panic, particularly in this quarter. Shares have been rising since lows around $170 and shot up to $210 as the numbers were announced. However profit taking and general market trends dragged Goldman back down to $203.

I previously wrote a couple things about Goldman Sachs with the latest being an August 9th article (Link) regarding the Alpha Fund losses. Within this piece I weighed the negatives and the potential positives, stating that in fact I think Goldman Sachs had found a bottom. Additionally, I outlined that this earnings number would be crucial in sending GS in the right direction and I ended by suggesting that "the plan that Goldman has in motion should lead it to calmer seas well ahead"

As for those losses. Goldman did book about $1.7Billion in credit losses but more than made up for that in other trading and underwriting business. In fact equity trading revenue more than doubled to $3.1Billion. In asset-management, even though a couple big funds lost more than 20%, Goldman was able to compensate by increasing management fees by up to 40%. When you can increase your fees by almost half when you're doing poorly, you've got what's called Business Clout! Something that simply can not be challenged by every other Investment Bank on the street.

It appears that Goldman has found these calmer seas even quicker than I would have anticipated and now I don't think that all time highs during the holiday run up are out of the question. A company this effective at profiting from market turmoil, slowdown fears and general economic panic, is something worth owning. At around $200 it may just be a very handsome Christmas steal also.

Disclosure: Author is long GS

18 September, 2007

Buyers flock into the Markets as Fed Cuts Rates by 50 Basis Points

The moment the markets were waiting for arrived at last. The Federal Reserve Interest Rate decision. A decision that swung markets heavily into Bullish territory as Interest Rates were cut by a full half percentage point. The Dow finished higher by 336 points while the Nasdaq and S&P were higher by 70 and 43 points respectively. All accounting for gains of over 2.5%.

The morning was highlighted by positive earnings and guidance from Electronics Retailer Best Buy (BBY) and Investment Bank Lehman Brothers (LEH). Best Buy posted earnings of $0.50/share versus the expected $0.44/share and beat the top line Revenue expectations of $8.45Billion by posting a monster number of $8.75Billion. Best buy even strengthened and tightened its outlook for the full year giving the market something to cheer about.

Lehman Brothers admitted that losses from Mortgaged related investments hit earnings but it compensated by posting dramatic tradings gains which more than offset those losses. As such Lehman lifted the entire banking and investment banking industries pushing stock higher broadly, and lifting its own shares 10% in the process. With the Fed's announcement of the 50 basis point rate cut, stocks immediately flew higher and continued to rally towards the end of the day. The biggest investment banks, which report earnings in the near future used the Lehman numbers to push even higher.

Goldman Sachs (GS) made back $13 to break the $200 share price barrier, a gain of almost 7%, while Morgan Stanley (MS) gained almost 6%. Financials came back strong on the news as not only did the Fed cut the interest rate by .5% but also cut the discount rate by another .5%. This was seen as a tremendous positive on the financial sector and investors piled back into these stocks.

Apple (AAPL) made it official this morning that the iPhone was coming to the UK. It announced a partnership with O2 to be the exclusive carrier of iPhone in Britain. Shares were up slightly on the news but drifted with the market before taking off following the rate cut announcement.

While investors were cautious approaching the Fed meeting, there's reason to cheer and smile now! However, the drastic 50 basis point cut should be viewed with still some caution, as once the news sinks in will investors be reading too much into the actions of the Fed and their long term economic effects? Its hard to say at this juncture because the main goal here was to alleviate the pressure from the credit collapse and get people talking economic strength again and not recession. I for one think that having a 50 basis point cut splashed across front page newspapers all across the US will spur optimism and a renewed faith in economic well-being. This is the best thing the Fed could hope for, and its a lot better for the average Joe to be discussing strength rather than a possible oncoming recession.

With the Fed pointing the market in the right direction its time to look at Technology for the holidays and the upcoming earnings seasons. October will be a month worth watching as major names in Tech report earnings and give guidance for their holiday expectations. The guidance game will be one to watch intensely and if Best Buy has given any indication today its that it'll be a holiday filled with shoppers.

Disclosure: Author is long AAPL, BBY, GS

17 September, 2007

Markets Drift Lower Day Before Fed Announcement

North American markets took a breather today drifting steady but lower throughout the day. The major indices were all off less than 0.8% in both American and Canadian Trading. All eyes are going to be on the Fed announcement tomorrow as market watchers prepare for anticipated interest rate cuts.

Of note in today's session was the early news out of Europe that the EU (European Union) upheld previous court ruling against Microsoft (MSFT) in their anti-competitive practices case. The software giant was accused of bundling Windows Media Player with its Operating System thus shutting out competitors. It was also accused of not allowing competition in the server space by not allowing competitors to properly design software so Servers and Computers could communicate as well as Microsoft only solutions.

The ruling was a big loss for Microsoft and it included over $600Million in fines. It also opens a door of precedent for other big firms who dominate their industries, especially in technology, to potentially be caught in the EU sights.

Bad News came after the market closed for investors of NovaStar Financial (NFI) as the firm deleted its dividend for this calendar year. The company is set up as a Real Estate Income Trust and had to pay shareholders but it has now lost that REIT status and shocked investors by totally cutting off this year's payout. This poses a dire outlook for the company as it tries to stay in business being a mortgage lender at a time when companies in its industry seem to be cutting jobs and falling left and right by the wayside. Shares of NFI were down almost 20% after hours.

While the Federal Reserve rate decision remains the focal point of trading this week, Apple (AAPL) its own special event in London. Most rumors suggest that the company is ready to unveil its partners in Europe for the iPhone. The announcement is taking place well before American markets open tomorrow and will be another catalyst for a company that is itching to break out to new highs as soon as the credit crisis subsides. All that comes from this announcement may be lost if the market perceives any Fed action as negative.

Investor should stay on the sidelines till the market can find a direction either way after the Fed announcement. While analysts and stock market experts are predicting a fall no matter what the Fed does, I am cautiously optimistic that the markets will recover from this rather quickly and would use dips as buying opportunities in fundamentally solid growth companies.

Disclosure: Author owns AAPL, NFI

13 September, 2007

$80 Oil and the Effect on the Marketplace, Time to Book Profits but Still Watch Energy Stocks

Price stabilization; the new key buzz word coming out of investment circles around oil futures. Consumers want it, oil companies probably not so much. Record breaking profits have become the norm at Exxon Mobil (XOM) but the average consumer will continue to feel the pinch at the pump.

OPEC, the world's oil production oversight organization, instilled an increase in production of 500,000 barrels per day in order to achieve some form of price stabilization. The fear of a sharp decline in oil stock piles has led to a continued surge in prices. Oil prices broke through a record barrier today and closed above $80.

Exxon, the largest of the "big-oil", rose another 1% to close at $88.62. Still $5 off its all time high, hinting that momentum and the market theory of "$80/share leads to $100/share" could be in full effect. Exxon stays shy of a half a trillion in market cap and with oil at these levels you have to wonder whether its just a matter of time before the company crosses that barrier. The one wild card is the Fed meeting on September 18th which could put a wrench into the spokes of this mini-recovery rally.

On the Canadian side of oil related news; Encana (TSE:ECA), Petro Canada (TSE:PCA) and Canadian Oil Sands Trust (TSE:COS.UN) are climbing back towards 52-week highs. Still a few dollars left to go for ECA and PCA but if supply fears continue to press on the market these companies will be breaking barriers left and right. They are the two prominent Gas and Oil companies the TSX has to offer. Canadian Natural Resources (TSE:CNQ) is eyeing its $78/share high after a 2.5% up day. CNQ has come far from its January lows of $53/share and as with, most of the Energy Sector in Canada it would be a great time to book some profits. For CNQ, the Alberta based oil and gas exploration play, I would like to see another pull back to the low 70s, high 60s before buying up more. This company has its headquarters in the sweet spot in Alberta's oil industry and has raised output guidance in its latest report. The anticipation of sustained greater output coupled with the rising commodity environment have spearheaded CNQ's run to its highs.

Buying into Oil at these levels I think is risky, as psychological record levels of $80 a barrel are broken. I would expect a slight pull-back in Oil prices from these levels as price stabilization comes into effect providing more workable supply numbers for the coming months. While some predict oil to reach $100 sooner rather than later, my stance would be that oil will sustain itself close to, but lower, than these records levels throughout the upcoming winter months.

Disclosure: Author is long CNQ

11 September, 2007

Market Musings: Oil Records, Interest Rate Uncertainty put Market on Edge

As North American Markets rallied today oil prices soared towards record highs on fears that OPEC would be unable to meet demand. Oil approached records of around $78/barrel as investors bought up these futures into the winter season, expecting diminished oil supply numbers from the US.

Before you run off to buy Exxon Mobil (XOM) or Chevron (CVX), it's important to note that these mega-oils already saw around 2% gains today and stand close to 52-week highs. OPEC, the world oil production policy maker announced that it would increase production by 500,000 barrels per day to help ease prices. The general fear of market uncertainty due to the US Credit situation is putting the world economy on notice and forcing policy making organizations to take steps to control pricing of various goods. The news of the production ramp sent oil futures back to the $77/barrel range.

The recent US jobs number came in drastically softer than expected as payrolls were actually cut. Analysts expected a drop in jobs but not a complete loss. This data however, carried forward the notion that the Fed must act on Interest Rates at its next meeting later in September.

I would be cautious up to this meeting because the market's resilient rally here is based on the fact that the Fed will in fact cut rates by .25 or .50%. This is a key decision for the Fed as it balances a seemingly US strong economy and a disaster situation with credit that threatens to spill over into all consumer segments. Investors need to be cautious through the next week and beyond as the markets seek to establish a direction while waiting for the Federal Reserve to make its policy announcement. With the market having priced in a 25 basis point rate cut (.25%) and now working to price in a cut of 50 basis points (.50%) investors need to understand the upcoming risks. If action by the Fed is limited it would spark a sell off that could see the Dow back into the high 12000s.

If the Fed provides further relief for the markets, come the September meeting, we could be off to the races for the annual Santa Rally starting as soon as October. Technology companies making those must-have items such as Apple's (AAPL) iPod & iPhone, Nintendo's (NTDOY) Wii and Sony's (SNE) PS3 stand the most to gain, as would Internet advertising giant Google (GOOG), and auction house pioneer Ebay (EBAY). High growth will be the name of the game for the end of the year provided the expected relief comes by way of Bernanke and the Federal Reserve.

Disclosure: Author is long APPL, GOOG and does not own any of the other companies mentioned.

05 September, 2007

Apple unveils Exciting but Expected iPod revamp, Stock suffers

The consumer electronics world held its collective breath today as Steve Jobs took the stage to show off Apple's (AAPL) new line of iPods for the holiday season. It's been almost 2 years since a total redesign of the flagship iPod, so most were expecting dramatic changes.

However, Jobs and Apple already changed the world this year! It was called the iPhone. A revolutionary device that ushered in a new era of interfacing, technology, entertainment and mobile communications. To think the company could pull another wonder out of its hat so soon was a stretch. But try they did and the results were astounding, but due to iPhone fever over the past 8 months, expected.

The focus on video and portable video is very apparent in the new line of iPods as the popular iPod Nano has become shorter, wider and sports a 2 inch screen capable of playing videos. The existing iPod received an interface refresh, was branded as iPod Classic and got a bump from 30GB & 80GB to 80GB & 160GB varieties. Perfect for that consumer going on vacation for a month with a load of music and video to hold on the go. The big announcement awaited the new flagship iPod and it came in the flavour of the now called iPod Touch, which incorporates many technologies seen first in the iPhone but without the mobile phone features.

The iPod Touch comes in 8GB & 16GB varieties and is built on the same Mac OS X platform that iPhone users are now familiar with. The most exciting part of iPod Touch is that it keeps the iPhone's wifi capabilities and packs the Safari Wed Browser. This allows iPod users the ability to connect to wifi networks and surf the Internet with their devices. Truly a remarkable thing, but in perspective analysts and investors have seen it before with the introduction of the iPhone 8 months prior.

Ringtones for the iPhone! Another eagerly anticipated feature that is now a reality. With the next version of iTunes, users will be able to use selected iTunes tracks and pay an additional $0.99 to chop up a 30 second portion into a ringtone for use with the iPhone. A great feature, all in all cheaper than other ringtones but nothing unexpected or truly groundbreaking here.

Now the news that's totally new. With the new iPod Touch comes the Wifi-based iTunes music store, which allows iPodders to buy music on the go through wireless networks. These tunes will sync up to their computers seamlessly when the iPod is reconnected to the computer at a future date. A deal with Starbucks was announced also, but seemed to confuse as to what "Free wifi" really means within Starbucks Coffee Houses. The assumption is that iPod & iPhone users (iTunes wifi is coming as an iPhone update soon) will be able to surf the iTunes music store for free, featuring specific Starbucks Music content, but would have to pay for other wireless surfing when sitting at a Starbucks.

Investors headed for the exits in excessive profit taking. Apple's fall from 52-week highs with the market led to a bottom in the 100s that begot a rise to $145 over the last weeks that was built on the hype that this event would bring more revolutionary products. Showcasing expected innovations did not appease the hype machine. Shares fell 5% to around 136 even as Apple announced a whopping 33% price cut for the 8GB iPhone (from $599 to $399). Perhaps investors saw this as a sign that demand was not as brisk as anticipated but I view it as Apple wanting to have a truly remarkable and record breaking Christmas shopping season as its lineup of media and communications devices fit neatly in market segments. With the iPhone price cut and the new iPod Touch model pricing of 8GB for $299 and 16GB for $399 the company has 2 flagship products that are sure to succeed over the holidays.

iPod sales broke 20Million units last holiday season and are expected to jump close to 25Million this holiday season. The injection of new iPods can only help the company reach these lofty expectations. The kicker still is the growth in video downloads as almost 100Million TV Shows have been downloaded to date. However only the flagship Video iPod had those capabilities while the most popular Nano models did not. This year that changes drastically and the full iPod line, with the expectation of the screen-less Shuffle, is now able to watch downloaded videos. Gonna be a rough season in that market for NBC if they can't make amends with Apple over iTunes contract negotiations.

While Apple still has some downside risk given the expected product announcements I believe its limited and only in the short term. The back to school computer season is reportedly very strong and the holidays appear to be ready to break records again as the company shifts its product line to video-centric Mac OS X based devices. The iPhone price cut is sure to spur sales and its only a matter of time until deals are crafted completely in Europe. Apple has so far this summer gone in line with general market trends and if fears resume from the credit crisis the stock will likely follow south. But for keen investors the opportunity is here again as Apple crafts new short term bottoms following this announcement. This opportunity is too good to pass up given company prospects going forward.

Disclosure: Author is long AAPL

04 September, 2007

GM Posts Surprise Sales Increase but the Better Auto Investment is in the Far East

Worries over consumer spending due to the shake up in the credit markets spilled over into the automotive segment as analyst estimates called for lower sales virtually across the board. The big US Automakers: Ford (F), DiamlerChrysler (DAI) and General Motors (GM) have been pressured by International producers Toyota (TM) and Honda (HMC) among others.

August numbers proved to be lower for most of the Automakers with only GM posting an increase that was seen higher due to rental car sales deals. GM posted a 6% sales increase but that included an unsustainable 24% increase in sales to rental companies. Ford posted a 14% decline while Toyota declined 3%. Chrysler, now separate from Daimler-Benz also suffered decreases. Can the auto industry provide decent returns in the long term? It's an industry that is now seen almost in the same light as the airlines and that's not a good look for the stocks of these companies. GM had its share of problems but recovered and Ford has its own share or problems and seen continued pressure as a lack of innovative vehicles are crossing the Detroit assembly lines.

Buyers are looking toward smaller, more fuel efficient vehicles due to the continued high price of gasoline and its Toyota, Honda and Nissan (NSANY) that benefit the most. In fact Honda and Nissan posted sales gains in the month. That's a promising sign as the overseas markers are capitalizing on not only American consumer trends but worldwide trends as well. The US automakers are struggling to find areas of growth and have shown that the innovative nature of American Car Design is all but dead. I personally can not remember the last American made vehicle that brought upon any kind of positive response except for the retro-styled Ford Mustang.

That's not to say that Toyota or Honda or Nissan make the prettiest cars either. The difference is though, that the luxury lines of these automakers are renowned for innovative breakthroughs and design promise. Honda's Acura line and Toyota's Lexus line are terrific positives for brand and design image and are one of the reasons that these auto makers deserve a slight market premium, in terms of a higher P/E ratio. Honda stands at 11, Toyota at 12 while GM sits at around 10 and Ford is trying to get back in the black after being plagued by losses.

To really turn the US automakers around a grass roots design reinvention has to take place and this is no easy task. The overseas players have the brand power (luxury lines), the incentives (cheaper more fuel economic cars), and the worldwide manufacturing to compete with and overtake their American counterparts. Toyota has some work to regain its highs close to $140/share but with its strategy well in place the sales growth should continue and barring an American miracle should emerge as the Car Maker of the world. Honda is a third the size of TM in terms of market cap and has room to grow its plant and model base.

The era of the great old American car maker is over for the time being as Japanese manufacturing strategy becomes more entrenched and the vehicles become more affordable and practical for the average consumer.

01 September, 2007

Markets Finish Higher on Bush and Bernanke Speeches while Apple's iTunes splits with NBC over Pricing

Optimism spread throughout the Financial Markets in North America Friday as Federal Reserve Chairman Ben Bernanke and US President George W. Bush presented speeches discussing the sub-prime mortgage crisis.

While not stating any certainties of an upcoming rate cut the Fed alluded to the fact that it will be ready to act if the economy becomes broadly hurt from the fallout of the credit-crunch. This was enough for investors to believe that a rate cut is more and more likely. The President conveyed a similar stance that it is not the job of the government to bail out over-extended investors, institutions and individuals. Bush did however outline a series of plans and proposals that will allow individuals to refinance some mortgages to avoid further potential loan defaults. Bush also presented proposals for slight changes to the tax code that would provide relief for people with heavy loan payments.

These were seen as positive steps by the markets as the major indices (Dow, Nasdaq, S&P, TSX) were all higher by about 1%.

In other market news Citigroup (C) is getting in on the bargain mortgage hunt as it is buying assets from ACC Captial Holdings (Parent of Ameriquest Mortgage Co.). This follows Bank of America's (BAC) recent $2Billion investment in Countrywide Financial (CFC).

In technology news Apple (AAPL) was in the news as hard-ball contract negotiations with NBC-Universal, a subsidiary of General-Electric (GE), fell apart. NBC noted that it will not renew its contract for shows in iTunes and let the current deal expire come December of this year. Apple took it one step further and stopped hosting new NBC TV Shows in iTunes before the television season starts later this September. The reasoning from Apple's press release was given as NBC demands for a 150% price increase per downloaded show. iTunes current rates are $1.99/show and NBC apparently wanted that to increase to $4.99/show, stricter piracy controls and the ability to change and bundle pricing. Apple stood its ground and talks faltered.

One of NBC's most popular shows Heroes had 23 episodes last season and at $5 a pop, a customer is expeced to shell out $115/season to be able to watch the shows on an iPod a day after it has aired on regular television. In the days of Tivo (TIVO) and the DVR the idea of drawing television audiences is about making it easier and cheaper, not more complicated and expensive. Season 1 of Heroes was just released on DVD for about $40. From a consumer perspective which party seems to have consumer interests more at heart?

There's been several editorials written about this issue including an open letter to NBC from iLounge.
Digg.com Comments (Link)
iLounge (Link)

Disclosure: Author is long AAPL, C, BAC