Filed under: Earnings reports, Google (GOOG), Microsoft (MSFT), Technology

With the stock market slowly moving off of lows set early last week, look for Google’s (NASDAQ: GOOG) earnings to be just what the doctor ordered to rocket the market forward. As Brian White posted, “Google’s shares have been shaken from a high of over $700 this past Christmas to under $543 today, as the company has joined in with the overall market teeter-totter amid continued housing worries and recession talk and FUD that spreads like wildfire every week.”

I think that the company will report blow out numbers, as it has done in the past. The catch this time is that the market hasn’t set Google up for a fall. I don’t believe expectations are all that high due to the market rout. If Google surprises to the upside, this will be what the bulls among us have been waiting for, and I would expect a nice 7-10% market move to the upside in the next two to three weeks.

A strong Google report would help justify what I have been saying that technology will be leading the market higher. Microsoft (NASDAQ: MSFT) had a great report last week, let’s hope Google has a similar report tonight.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer’s has no positions in any stock mentioned as of 1/31/08.

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Filed under: Major movement, Other issues, Good news, Recession

MBIA Corp. (NYSE: MBI) remains confident that it can keep its AAA ratings and brushed aside suggestions by hedge fund investor William Ackman that it’s on shaky financial ground.

“Our anticipation in response to the turn in the market has been singular among the monoline insurers, putting us in the best position to maintain our AAA ratings among the large public companies,” The Wall Street Journal quotes CEO Gary Dutton as saying.

Those bullish comments were enough to give a lift to MBIA’s shares, which are down almost 80% over the past year, along with rival Ambac Financial Corp. (NYSE: ABK), down almost 87% for the year. For now, the market ignored the $2.3 billion fourth quarter loss which included a whopping $3.5 billion in write down in its credit derivatives portfolio.

Ackman, who is pledging his short-selling profits to charity, argues that the Armonk, NY-based company faces losses of $11.63 billion from asset-based securities nearly equal to the $11.61 billion losses looming at Ambac. MBIA , which says it’s on track to raise $2 billion, scoffs any suggestions that it may be insolvent. CFO Chuck Chaplin told the paper that it has enough capital for the next six years.

Is this a sucker’s rally or the real deal?

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Filed under: Good news, Federal Natl Mtge (FNM), Politics, Housing

The $150 billion fiscal stimulus package that’s winding its way through the U.S. Congress will not represent a panacea for the U.S.’s economic ills, an economist argued, but it will represent modest good news for one segment — the beleaguered housing sector.

The fiscal stimulus bill currently under discussion in the U.S. Senate calls for raising Fannie Mae and Freddie Mac’s conforming loan limit to $729,750 through 2008 from the current $417,000.

Conforming loans are conventional, fixed-rate mortgages for good credit borrowers that banks make that are eligible for purchase by Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE). When Freddie and Fannie purchase these loans from banks, it “frees-up” money that the banks can use to grant mortgages to future borrowers, thus expanding the pool of funds available for mortgages.

Economist Steve Affinito told BloggingStocks Thursday that while it’s important to underscore that the higher conforming loan ceiling will not eliminate the U.S. housing sector’s recession, it is “a critical, essential step in the right direction,” in his interpretation.

Continue reading Proposed, higher conforming mortgage limits seen aiding housing sector

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Filed under: Management, Merrill Lynch (MER)

In a rare indication that there may actually be a correlation between losing massive amounts of money and not receiving a bonus, Merrill Lynch (NYSE: MER) president Gregory Fleming and other top officials at the company will not receive bonuses for 2007, a year marked by a precipitous decline in the value of the company’s stock resulting from massive losses on subprime loans.

But, The Wall Street Journal reported [subscription required], “few people are going home empty-handed. In addition to their base salaries, $350,000 each for Mr. Fleming and Robert McCann, president of Merrill’s global wealth-management business, the New York financial-services firm said it will grant” 1.2 million and 971,346 “retention options” respectively.

I question the reasoning behind the retention payments. If Mr. Fleming and company are the kind of people who would skip town in the wake of huge losses, does Merrill really want them? I’m not so sure.

Furthermore, these executives received bonuses based on the company’s performance in the past year — performance that was buoyed by gains from the debt that is now being written down. Perhaps they should have to give back those bonuses.

It’s a nice gesture that Fleming won’t be receiving a bonus, but executive compensation at the company — especially the huge package former CEO Stan O’Neal left with — is still a joke.

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Filed under: Products and services, Apple Inc (AAPL)

It seems that market analysts and pundits can’t stop pulling out their anal selves from the woodwork to worry about possible sales discrepancies between Apple, Inc. (NASDAQ: AAPL)’s iPhone sales numbers and accompanying AT&T, Inc. (NYSE: T) iPhone activations. Some have even pointed out what I call the one million plus unit discrepancy.

Is this speculate discrepancy way off the mark? Analyst Ezra Gottheil thinks so. There is some market fear that Apple’s iPhone sales not meeting up with AT&T’s iPhone activations means that Apple stands to lose out on two years worth of revenue on those “missing iPhones.” Apple’s sweetheart deal with AT&T gives the tech company a cut of every AT&T iPhone customer’s monthly bill, you see.

Does Apple stand to lose future revenue streams by selling iPhones that are not activated by AT&T customers? Sure — but it’s not a huge financial impact to the company according to Gottheil. Although quite a few iPhones have been rumored to have been sold, unlocked (using multiple hacking methods) and used with non-AT&T wireless carriers, these numbers have not been wholly verified by either Apple or AT&T. Has AT&T stockpiled unactivated iPhones that represent Apple’s sales numbers and AT&T’s lower iPhone activation numbers? That’s highly doubtful. Until a solid explanation comes forward, is it that big of a deal to Apple pundits? For the time being, it seems so.

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Filed under: Consumer experience, Competitive strategy, Penney (J.C.) (JCP), Polo Ralph Lauren’A’ (RL)

Today’s Wall Street Journal has an article about the cost-cutting measures going on retailer, JC Penney (NYSE: JCP). The article, essentially an interview with CEO and Chairman, Myron “Mike” Ullman III, details Ullman’s changing of gears, from aggressive store expansion and online growth to scaling back in the face of a looming recession.

The CEO is expected to announce today plans to merge the buying and marketing operations for store and online sales, cutting as many as 200 jobs.

In the article, Ullman says he may scale back store expansion over the next two years.

Getting more of the consumer’s wallet

Ullman says, “Half of the families in the U.S. shopped with us at least once last year. But we only get 7% of their spending. So, our biggest opportunity in the downturn is to make every visit they make to our store, Internet or catalog more productive by offering more innovation.”

Continue reading Pinching pennies at Penney’s

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Filed under: Earnings reports, Good news, Competitive strategy

The separation of the company into a consumer products company, Alberto-Culver Company (NYSE: ACV), and a beauty supply distribution company, Sally Beauty Holdings Inc. (NYSE: SBH), is complete. Most of its restructuring costs are behind it. The company has closed excess production facilities, instituted a more efficient inventory management system, and introduced a more favorable product mix favoring higher-profit margin items. As a result, the revamped Alberto-Culver Company returned to profitability in 1Q2008.

Net sales increased 14% to $400 million. Earnings from continuing operations increased a whopping 60% to $48.3 million. 1Q2008 net earnings were $30.9 million, much better than 1Q2007 net loss of $5.9 million. Most importantly, there were actually EPS of $0.29, a far cry from zero EPS in 1Q2007. Given the good 1Q2008 results, Alberto-Culver upped its dividend payout 18% to $0.065 per share. The stock closed recently at $26.76, up $0.86 or 3.32%.

Patient value investors may want to take a look at Sally Beauty Holdings Inc., the spin off company. The stock has struggled recently. It currently trades at just over $8 per share but has a lot of room for growth potential.

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Filed under: Consumer experience, Competitive strategy, eBay (EBAY)

In one of the largest customer-oriented changes I’ve seen on eBay, Inc. (NASDAQ: EBAY) in quite some time, the world’s largest online auction house will no longer allow negative or neutral” customer feedback” ratings to be left by auction sellers on the accounts of auction buyers.

The thinking goes like this: a buyer may be afraid of leaving negative feedback on an auction for fear of the seller retaliating by leaving negative feedback themselves.

Imagine this: you purchase an item from an eBay seller and that package arrives with a product significantly different than what was advertised. You fulfilled your end of the bargain; the seller has not. If you leave negative feedback for the transaction, the seller may come back at you with an inappropriate feedback rating. Thus, both parties may not leave feedback at all — and that’s not what builds trust in the eBay community, right?

The changes won’t happen until this coming May, and current feedback ratings for both buyers and sellers will be based on a 12-month rolling average instead of a “lifetime” rating, which seems more appropriate. Perhaps changes like these — which seem to come as a response to customer demand — will help stem the tide of nastiness some eBay customers have had recently about the auction company.

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Filed under: International markets, Newsletters, Boeing Co (BA), Stocks to Buy, Technology

“It’s not so easy building an airplane; harder still to develop a new one from scratch and then build it in various pieces around the world to be shipped to one place for final assembly,” notes technology expert Mark Mowrey.

The editor of The Prudent Speculator Tech Value Report explains, “No surprise, then, that this month’s new buy, aerospace giant The Boeing Company (NYSE: BA), has fallen behind schedule on the 787 Dreamliner.” Here is his bullish review.

“Delays aside, the plane remains the most elegant, sophisticated and efficient carrier-class planes in the world, one for which we bet customers are willing to wait.

“We believe the company will move beyond pre-launch troubles this year and continue to innovate along the gamut of its aerospace endeavors, and find the stock’s valuation a compelling entry point.

“In addition to a just-identified 3-unit addendum to an existing order for six Dreamliners from Fiji-based Air Pacific, Boeing has racked up orders for 817 of the 787s from 55 different carriers around the globe.

“The airlines were attracted to the advantages the Dreamliner’s nearly half composite (instead of a similarly strong, though heavier aluminum and titanium) structure which should utilize 20% less fuel for a given load and range.

Continue reading Boeing (BA): High tech, high value

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Filed under: Bad news, Competitive strategy, Circuit City Stores (CC)

Although Circuit City Stores, Inc. (NYSE: CC) reported a horrible December in terms of sales and profits, the second-largest consumer electronics retailer in the U.S. was one of the top three online consumer electronics retailers in December, trailing leader Best Buy, Inc. (NYSE: BBY), but ahead of online auction giant eBay, Inc. (NASDAQ: EBAY).

Nielsen ratings figures put unique web visitors like this: Best Buy at 23.99 million, and Circuit City at 19.61 million. Figures for eBay weren’t available (as some separate categories have to be measured together), but the real news was that Circuit City’s December 2007 website traffic growth increased more than 20% from 2006’s level. Best Buy’s December 2007 visitor count rose only 9%.

Why couldn’t Circuit City capitalize on such an impressive amount of unique holiday retail traffic? The failure of the retailer to make any sales gains this past holiday season just seems endemic of multiple failures and problems the company has at this time. While we wait on Circuit City CEO Phil Schoonover to be sacked from the corner office, perhaps a lingering, potential sale of the company will force the issue and Circuit City can get back to business. Profitable business, that is.

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