30 June, 2009

Morning trade halts stock rally

100 points off for the Dow before lunch as markets in North America prepare for National Holidays. Canadian Markets close tomorrow for Canada Day while Americans prepare for the 4th of July weekend leaving markets in trading flux for the week. Today's decline was pushed in part by a lower reading of consumer confidence for the month of June. May highs in consumer confidence retreated partly in June, putting some traders on edge over the supposed recoveries in consumer spending expected this summer.

The world media has seen its share of tragedy this past week with the deaths of Ed McMahon, Farrah Fawcett and the King of Pop Michael Jackson. The 'Thriller' singer's death has overshadowed many noteworthy market moments of the past few days due to the sheer global reach of Jackson's fame. The legacy of this great singer, and polarizing personality, will be up to debate seemingly forever.

At the top of the market pages was the sentencing of Bernie Madoff, responsible for the biggest individual Investment Fraud of all time, now getting his just due, with a sentence of 150 years in prison and the forfeiture of virtually all his related assets.

Other noteworthy market swings included a further decline of housing prices and a drop in Oil. Housing prices tumbled 18% year over year, as well as 0.6% month over month in April and Oil retreated back below $70, settling around $69 a barrel.

23 June, 2009

The Grounded Plane: Boeing delays 787 Dreamliner

Technical complications, worker strikes, and everything in between has at one point or another hampered Boeing's (BA) ability to deliver its much-delayed 787 Dreamliner aircraft. The stock took an almost 7% dive today, adding to a 40% drop in the last year and a 50% drop since October of 2007. That being the announcement of the first 787 delay for the aircraft company.

Investor patience is being tested to the limits with Boeing as it is in a sharp fight with rival Airbus for future contracts in an industry marred with carriers in serious financial trouble, given the latest economic fallout and fluctuations in energy prices. Boeing has historically seen several missteps as it works on its revolutionary, next generation plane and what had been seen as a sales boom for the company is now once again stalled at the factory.

The aircraft is a first for many reasons, from its 250-seat advanced interior to its exterior made entirely of composite materials, an industry first. Boeing was confident in its ability to deliver the aircraft in the first half of next year to its customers, however delaying the first flight indefinitely due to newly-found exterior stresses, will likely push dates back by months. This news did not please investors in today's trading session, sending shares lower by $3.

What's in store for Boeing stock? The March lows of around $30 will still be the complete floor of support, unless the general economic footprint fails further, so any pullback into the low $40s is attractive for this large-cap with a nearly 4% dividend yield. Remember, this stock was in the $80s a year ago, despite having already delayed the 787 several other times. So when that first flight and initial delivery take place next year, those are catalysts that provide the company with two major milestones to appease investors. Aircraft have been in the news recently for the most tragic of events, as the investigation into the Air France Airbus crash continues, but precisely when the mood is most distraught around an industry, is when some attractive valuations can be found. Is it Boeing's time in the mid $40s? Yes, but buy in parts, and if the stock retreats to $40 it'll itself be a Dreamliner in the year(s) to come.

Disclosure: Author holds no position in BA

15 June, 2009

Markets sink Monday on Economics as Politics rears its head

Well, the week that wasn't, was it fact followed swiftly by heavily directed market action. The bears came out Monday and sent stocks lower from the start of trading as the Dow has been hovering another the minus 200 point total all afternoon.

Weak economic signs triggered some of the sell-off, which was broad enough to come to stocks and commodities. A Home Builder survey citing a drop in confidence was partly to blame, as was a New York survey of a decline in factory activity, according to the Wall St. Journal. Oil also slid, falling back towards $70/barrel after spiking to the mid $70s last week.

With option expiration occurring at the end of this week, traders are looking at where lock-ins are likely to be. Lock-ins being the certain levels stocks regularly fluctuate and float towards during options expiration week. While several economists and general "experts" are throwing around the term "green shoots" these days, the market's rally since the March lows proved that stocks at attractive valuations can recover to fair value in almost no time at all, given even glimmers of prospective recovery. Many are hopeful for economic recovery by the end of this year, however the still rising unemployment is tempering optimism and political fighting between Republicans and Democrats on everything including the most trivial of issues does not invoke the confidence Americans need in their government at a time of broken-down micro and macro-economics climates.

The President and his administration are trying to fight battles on several fronts and it appears to be taking its toll. The financial situation, the automotive situation, housing, health care and education reform, and the stimulus package are only some of the bigger areas where President Obama and his team are entrenched for change, and involved in business more heavily than any world leader would want to be. Could an agenda push too broad for its own good be responsible for the latest setbacks in the stock markets as businesses see future profitability diminished by stricter rules and regulation?

Most investors, economists and traders know significant overhaul is needed, though many don't accept several sweeping changes at once. The bankruptcy in the American auto sector, leading to government ownership and European partnership for 2 of the big 3 has turned that industry on its head. The financial fallout of the credit crisis is still very much at the top of the heap of troubles in the United States, with the Treasury and the President rolling out new reforms and a plan of action for the financial sector which will undoubtedly bring about increased regulation, not likely to appease profit seeking investors. The health care issue, the latest on the President's seemingly worldwide tour of change, may bring prosperity to some, in the field of electronic medical records and cost-saving technology, but is sure to complicate business for the private insurers and medical practitioners who in the future see a potential competitor in the public sector.

An agenda this broad and this ambitious is always met with an incredible number of challenges, but the time may not only be right, but may in fact be perfect, allowing America to somewhat reset itself stronger and leaner, more productive and more profitable in the years to come. As the economy recovers and some banks pay back TARP money and some infrastructure projects begin in the summer across America and some medical institutions start saving costs, the up swell of goodwill can spread across the country and public perception will lead to spending, leading to profitability, and leading to stock market advances.

Stocks are taking a breather today, after a 40% rally its almost expected, but looking to the future, the Investor should not be afraid of an administration taking drastic steps, but should embrace the goal that all investors share. Prosperity

12 June, 2009

The Non-Week that was. Markets remain flat

Although financially, politically and economically a lot happens each and every week in this game, sometimes you wouldn't know it by looking through the stock pages. Both the Bulls and Bears are pushing for some direction but neither is making any headway.

The tally on the S&P for the week, barring a late Friday afternoon directional miracle: +0.6%!. The same for the Dow Jones, while the Nasdaq lags at a weekly loss of 0.3%.

As Options expiration nears at the end of next week, Traders will likely have more ammunition to find a direction. So as one of the more brilliant pieces of advertising these days dictates:
Stay thirsty, my friends.

08 June, 2009

Apple cuts Mac prices, unveils Software and new iPhone at WWDC

The yearly developer showcase that is Apple's (AAPL) Worldwide Developer Conference (WWDC) kicked off with a keynote, once again sans-Jobs, but was packed with several software and hardware announcements.

Consider Palm's (PALM) highly touted Pre smart phone sold well in its first weekend the landscape for telecom mind share had shifted away from Apple for at least a short while. Analysts early estimates point to sales of about 50,000 Pre devices in the first weekend for Palm, which compares to about 270,000 devices when the original iPhone went on sale and 1,000,000 units for the iPhone 3G. While it may be unfair to compare launches since Sprint is a much smaller carrier compared to AT&T, and the iPhone 3G launched in a multitude of countries, its the media that counts. Palm made a good sized dent during the Pre's announcement, sales will have to continue to deliver if it hopes to turn that dent into a crack.

But when Apple takes the stage for any event, competitors in each line of business must be anxcious, hoping to be able to breathe a sigh of relief as the rumors come and go with little to no surprises. At today's event, it seems every business Apple is in, it made headaches for its competitors.

The Computer Hardware business: Apple reduced pricing on virtually all of its machines, turning the well designed aluminum laptops into a family of MacBook Pro machines starting at $1199 for the 13 inch computer formally known as simply a MacBook. The slim MacBook Air also got a price cut and Apple kept the $999 price point on the previous generation white plastic MacBook. The only model in the line to keep only the MacBook name.

The Computer Software business: Mac OS X Snow Leopard, branded and versioned like a full OS upgrade, was priced like a going out of business sale. $29 for the next version of Apple's Operating System due in September, has got to make the folks at Microsoft (MSFT), who are rolling out Windows 7 a month later, a little bit edgy.

The Phone business: Apple, having repeatedly said, didn't want to leave a price umbrella for competitors has finally publicly brandished an iPhone on the world for $99. While unveiling a 'newer, better, faster, stronger' iPhone 3GS, sounds like a Porsche doesn't it, the company kept its $199/$299 pricing for the new models, setting the existing iPhone at the magic 99 figure. This puts tremendous pressure on the makers of Blackberries, and Androids, and especially the Pre, which is $199 after a $100 rebate.

Many hoped, Steve Jobs would make at least a minor show-stopping appearance, the rumor mill still has Apple's iconic CEO returning to work at the end of the month, which will put several analysts and many potential investors at ease. Apple's year-to-date run up of 69% has showed that Investors feel the company can survive without Steve or they are already sure he will return. However, the company still stands $60/share away from those gaudy 2007 highs, with a business models that combined are selling more devices than ever.

Disclosure: Author is long AAPL

02 June, 2009

Console Makers battle for fans taking over Gaming Expo

Video Games and Movies, the two business channels that were least hit by floundering worldwide economics. Box Office receipts and attendance are at or near records and the growth of gaming, while pausing slightly, still stands out as a tech sector on the rise. With gaming options like Nintendo's (NTDOY) Wii & DS, Apple's (AAPL) iPod Touch & iPhone, Microsoft's (MSFT) XBox and Sony's (SNE) Playstation 3 & PSP the kids (and ever increasing adults) these days have choices aplenty.

The Electronic Entertainment Expo goes on as we speak and it has been an interesting couple of days with keynote speeches by the big 3 console makers; Microsoft, Nintendo & Sony. While its been common knowledge that Nintendo and its motion controlled & causal gamer placed Wii has been the big winner in this generation of the console wars, with NDP data showing it outselling the XBox by 2:1 and the PS3 by a factor of 2.5:1 lately, the true test is likely to be longevity.

It's no surprise that laggards Microsoft and Sony had to deliver something to excite fans and developers in order to gain traction against Nintendo. It was the folks from Redmond up first yesterday with a keynote speech that excited not only the XBox faithful but fence-sitters alike.
Not only was the XBox opened up for several applications including social networks Twitter and Facebook and music streaming service Last.fm, it also introduced several enticing games and a entirely new control system.

It was the control system that garnered the heaviest reaction. "Project Natal", as it was coined, gives players a way to become the controller for their games. A camera system with facial and voice recognition follows a player's movements and can translate them onscreen for gaming interactions. The Microsoft team showed off several demos, straight out of Minority Report, of the "still-in-development" technology but it was very promising and it goes completely the other way from Nintendo's popular Wii motion controls. A development high-point for Microsoft in the gaming world? Or would Sony steal some thunder with their own announcements just a day later?

Sony's day had arrived and the company had several announcements to make, first a foremost another handheld system, dubbed the PSP Go. Sony will continue selling its existing PSP which has slowly but surely been selling very well for the company (although not as well as Nintendo's DS line or Apple's iPod Touch). With this new version Sony is going to full digital distribution for games and media making it a direct competitor to the aforementioned iPod. With 16GB of storage it undercuts the iPod's price by $50 ($249 vs $299).

Not to be outdone, Sony also jumped into the Motion Control business with a new controller. Internet outlets were quick to praise Sony's efforts as the motion control (based on a similar technology as Hollywood CGI & Motion Capture) allow the player to use the controller for a vast spectrum of game situations with incredible control accuracy. One of the demos showed off how to "air-write" with the controller, with incredibly precise results. The difference between Sony's and Microsoft's new controller entries is that in Microsoft's case the player actually need a controller to play.

Along with an army of popular game developers, both Sony and Microsoft made their case to the video game community that they are not only in the business to try and win and despite Nintendo's early lead, but also want to allow this generation of console hardware to still go strong. If today's announcement are any indiciation there's plenty of innovation left in the space. But what does E3 have to do with Investing?

Sony, despite its size is a vast gaming operation, and with the company posting its first yearly loss, it needs the Gaming operation to deliver incredible results in the years going forward. This will not happen without 1) Exciting innovations in the hardware (and lower costs) and 2) Developers excited about making games for that hardware. Sony has been in 3rd place in console sales since the PS3 launch but it has a long lifetime committed to the platform and even still sells a lot of PS2 machines. The bet on Blu-Ray as a standard will be debated for a long time as to whether it helped or hurt the PS3 in its early years, but the fact remains that Sony still loses money on each sale. The one thing consumers are clamoring for they still haven't received with the machine and that's a deeper price cut! Until it can cut those costs, Sony may simply have to suffer through more months at number 3 on the sales charts.

But with an upcoming stable of games, the new PSP Go and an impressive Motion Controller demo Sony is hitting the right track with Gamers and Developers, and Sony's stock followed suit with a gain of over 2% to close at $28/share.

Microsoft on the other hand, prints money from Windows and Office and doesn't really need a Gaming division, or does it? It in fact needs the XBox to succeed now more than ever for one simple reason. Image! Microsoft has a huge image problem amongst the computer using youth, with a floundering Windows Mobile team being eclipsed by Apple's iPhone, the disaster that was Windows Vista opening the door to more mainstream Mac usage, and the ignorance of anything related to Search the company can come up with due to Google's dominance in the area. This "Old-man's" Microsoft, being out-innovated by hipster companies will eventually trickle down to its core businesses.

The devices group may be that saving grace, while the Zune hadn't exactly lit anything on fire, the original XBox was a good start that has picked up steam with the XBox 360. The innovations of Project Natal, specifically the player controller, are the kinds of things the computer buying youth can get excited about, and once you've got them, if Microsoft can link the XBox brand with the Microsoft corporate image, a Windows user may come back or emerge. Microsoft stock was up about 2% on the day of its E3 speech and sits at $21.40/share.

While Video Games may have been child's play in the past, this business is as important as ever and some of the biggest tech names on the planet rely on a little old conference to reshape an entire corporate vision. Maybe its time to put a little stock into what things like E3 and those who attend have to say.

Disclosure: Author owns AAPL, holds no position in any stock mentioned.