Morning trade halts stock rally

Submitted by WC Power Tech Fund

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.

The Grounded Plane: Boeing delays 787 Dreamliner

Submitted by WC Power Tech Fund

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.

Markets sink Monday on Economics as Politics rears its head

Submitted by WC Power Tech Fund

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

The Non-Week that was. Markets remain flat

Submitted by WC Power Tech Fund

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.

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

Submitted by WC Power Tech Fund

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.

Console Makers battle for fans taking over Gaming Expo

Submitted by WC Power Tech Fund

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.

GM is finished as Bankruptcy nears, shares slide below $1

Submitted by WC Power Tech Fund

Shares of General Motors (GM) are off about 20% today as all signs are pointing to the inevitable bankruptcy filing on Monday June 1st. The struggles in Detroit continue to drag down domestic Automakers but GM’s well-publicized cash flow problems and stand-offs with the Federal Government have led to its demise.

Unlike Motor City brethren Ford (F), GM was unable to reign in enough the costs that had been spiraling out of control as deals with the UAW and CAW only go so far. The cost-cutting pacts with the Canadian union and the ownership agreements with the US Union could not in the end support the business model without an infusion of outside help that wasn’t in sight. Italian car maker Fiat is still interested in GM’s European operations to the tune of a merger with the Opel brand, but without a leg to stand on, General Motors as this generation has come to know it, no longer exists.

The electric Volt will not save the company now, far too little and far too late, all that will happen now is a sell-off of assets to anyone willing to buy. Perhaps GM can pick up the pieces and re-emerge as a brand in-tune with a new generation of motorist, but as a company and especially as a stock in today’s market it is.

Turmoil at GM can only mean good things for competitors, with the company distracted by the slashing of assets, the brokerage of deals & spin-offs and the necessity of brazen survival for workers up and down the corporate chain, the only winners will be other car-makers.

Names like Ford, Toyota (TM) and Honda (HMC) should emerge with a stronger competitive advantage while luxury European brands continue to fight for the affluent customer throughout North America. Auto Stocks are all marginally higher today signaling that although one of the Titans of the industry has fallen, the car business will not go away and the remaining horses in the race will not slow down to pick each other up. What sometimes seems like a 0-60 sprint in the car business actually is and I expect the other big automotive companies to not pull any punches when it comes to advertising their strengths, and as is always prudent advice when it comes to investments: Stick with the strong.

Consumer Confidence outweighs Housing Prices as Markets Rally

Submitted by WC Power Tech Fund

US Markets found themselves on the buy side up between 2 and 3% at the last hour of trading as stronger consumer confidence data triggered a surge of bids in morning trade. The Consumer Board’s confidence index rose to 54.9 in May from a 40.8 reading in April and this jump was enough to get investors to shrug off another rather negative housing data point.

An S&P Index of Housing prices reported a decline of 19%, details at CNBC (Link), which was the steepest drop in the reading’s history. Foreclosures, economic woes, and increasing supply dampen prices all are contributing factors to the decline, however, as these prices bottom, investors clearly see a bottom forming with the terms “housing affordability” and the like being tossed around.

The increase in consumer confidence was a heavily watched metric that started the market’s rally in the early hour. The forecast for confidence was pegged at around 42 and May’s reported 54.9 mark handily trumped that, leading to a flurry of buying activity.

As for other market news, Technology was a main driver, primarily led by an upgrade of Apple (AAPL) shares. One of Apple’s skeptical analysts, Katy Huberty has finally changed tunes, with an upgrade and a substantial price target raise from $105 to $180. The Morgan Stanley analyst has had an appalling record of late predicting Apple’s quarterly results, at one point being rated the “worst” in terms of estimate accuracy in research amongst 8 top Apple analysts, which is why her bearish tone had attracted far more skepticism than that of RBC Capital Market’s analyst Mike Abramsky (He too however recently changed his tone as fears of Steve Jobs’ sabbatical lasting indefinitely have subsided for the time being).

The reason for the change of heart, that ever popular iPhone, which by all rumour accounts is due for an upgrade during the WWDC event the company will host in early June. While speculation runs rampent about just what features will be included in new iPhones the sheer numbers just dont lie. Over 30Million iPhone/iPod Touch buyers downloading 1Billion applications creating a massive, and massively sticky, software distribution and upgrade cycle.

Apple shares have double the Nasdaq advance rising over 6% in late trading.

Disclosure: Author is long AAPL

Memorial Day

Submitted by WC Power Tech Fund

Canadian market action could only do so much as Americans take the long weekend on Monday in honour of those lost in military service. During these times when North American troops are engaged in war on two fronts it is imperative to remember just what it means when life is taken away in the service of one’s country.

Tool Time with Lowe’s & Home Depot

Submitted by WC Power Tech Fund

The markets had a strong start to the week, led mainly by Bank stocks and the Tech sector. However, the two biggest names in Home Improvement were also on tap to deliver results. Lowe’s (LOW) delivered Monday with bigger brother & competitor Home Depot (HD) coming in on Tuesday.

During Monday’s bullish day, Lowe’s was able to capitalize on results that beat expectations and climb 7% utilizing its first-reporter advantage. Now although profits fell 22% year over year, expectations were for a more severe drop. Income came in at $476Million vs $607Million in the year ago quarter ($0.32/share), while on the top line, Revenue was $11.83Billion vs $12.01Billion, a drop of 2%.

Compared to expectations of $11.63Billion in Revenue and $0.25/share in Income, it would appear that Lowe’s is holding onto business at a better than expected clip. However, talk from traders, and what was wildly reported by the Investment media was that the expectation beating results were driven primarily by cost-cutting, as top line Revenue numbers were rather muted.

Lowe’s did its best to try and appease Investors by guiding higher for next quarter with a range of profits from $0.51 to $0.55 per share, compared to Wall Street’s numbers of $0.50 per share in earnings. Lowe’s continues to pay its quarterly dividend, with a yield standing at about 1.7%.

Housing data coming out Tuesday morning along with results from Home Depot were worrisome to Investors at the start of trading. Housing starts, which is a big part of the Home Depot and Lowe’s business models fell 13% to a record low in April, according to the latest figures. These headlines took much steam of out of a pretty good Home Depot report which largely mirrored Lowe’s from the day before. Once investors digested the news, there was a few points that could act as silver linings for bullish traders. First off, the number was actually better than the forecast by economists (485000 vs 525000 expected), and second, a majority of the drop off was due to condos and related living fixtures. An area of the Home Improvement sector generally not suited to the repeat home renovation business that both Lowe’s and Home Depot rely heavily on. Case in point, the number of new pure housing starts actually rose by nearly 3% in April, which provided some good news in this sector, hence the rebound in Lowe’s stock to near break even territory.

The Home Depot stock story today, is unfortunately not as rosy, as many buyers of the stock yesterday retreated today, selling on the expected earnings news. Nearly a 10% drop in Revenue to $16.2Billion was met with mixed reaction even though profits were above expectations, mainly due to cost cutting. Ex-items Home Depot earned $0.35/share versus analyst expectations of $0.29/share, which had been baked into the stock already given Lowe’s nearly identical performance just a day ago. Home Depot lost around 4% this morning and hasn’t seen the same uptick as its smaller competitor after the housing report had been looked over. Home Depot has the added benefit of a dividend yield, twice the size of Lowe’s for those keeping score.

These stocks will largely trade in tandem, as the economy recovers as both are similarly priced to earnings and both have the cushion of a dividend yield for the more conservative Investor. With foreclosures still likely to rise in the near future and the unemployment number still showing no signs of turning back around for now the time to invest in these names will still present itself later in the year. You can only go so far on cost cutting alone, and Wall Street will only celebrate this type of approach for a few quarters before some real questions have to be answered on the conference calls. For now both should be a Hold, but as economic indicators improve and the work force stabilizes and begins to grow again, there will be a surge of pent-up Home Improvement demand going into 2010. There will still be time to own these names, but for a longer term play LEAPS should be in the investment cards for some potential high-powered Tim Taylor style returns.

A Look at Energy with Oil racing back to $60

Submitted by WC Power Tech Fund

Oil, like many investment vehicles had been battered along the hard road from peaks in 2007 nearing $150. The fall in fact, had been so dramatic that prices for the commodity were down to $34 a barrel in February of this year. Set against the backdrop of American economic problems and the ongoing ‘Carpocalypse’ the slide in oil is completely understood.

However, of late, things are changing, and with a resurgence of market participation in the last 2 months, oil has enjoyed a steady climb and has now almost doubled off its lows. The traditional American big oil names have held steady as Exxon Mobil (XOM) is down 5% in the last 3 months, and up 1% in the last month, while competitor Chevron (CVX) has been virtually flat for 3 months. Nothing to light the socks off in any portfolio. These big names, which have enjoyed such outlandish record profits in recent years are being propped by their cash and their dividend payments, but none of that spells growth during a bullish run on the markets in this still economic-headline driven marketplace.

What has been making noise have been the smaller players. In the oil and energy business, small is of course relative. ConocoPhillips (COP), which reported recently an 80% year over year drop in profit has risen 12% in the last month, including a 4% pop on earnings day and its S&P rating of Strong Buy. Not to be outdone, Haliburton (HAL) has rallied strongly with a 34% gain in the same single month time frame.

In Canadian markets the big story of late was the deal stuck by Suncor (TSE:SU) to purchase Petro Canada (TSE:PCA) in a stock deal worth approximately $15Billion. On the news of the deal, Suncor stock fell but has since rallied back to the $35 level, which is about 6% higher than pre-deal prices. Petro-Canada, being the takeover target has consistently rallied from $30 to its current levels of $45/share. Who says M&A activity is dead?

Shifting to the drillers and the market has seen a similar story. Bigger Transocean (RIG), being outgained by smaller Nabors Industries (NBR). Despite estimate-topping earnings and a buy recommendation from Citigroup, RIG has performed only admirably when compared to gains from its smaller counterpart. Rig is higher by 22% and 10% in the 3-month and 1-month periods, while Nabors has shown gains of 59% and 40% in those same periods.

While the smaller players may have risen faster with the market ramp-up, Investors shouldn’t let themselves get carried away, and take some energy-related profits when they present themselves. Headlines are already starting to change from a tone of “Go Bullish Rally” to “Is It a Suckers Rally” and it may just be that over the next couple of months the staple behemoths of the Energy industry will make the safest investments.

Disclosure: Author owns NBR, SU, recently sold PCA

For Bank Of America, $34Billion, what $34Billion?

Submitted by WC Power Tech Fund

Bank Of America (BAC) has been surging the last few days, up 56% the last 5 days, despite leaked information from the Federal Government Stress Test results. Even though the leaked details of BAC’s capital needs seem ludicrously high, the number could have been a lot worse. Analysts have been on BAC’s high horse, upgrading the stock, despite the need for $34Billion in capital! And here’s why.

Despite the fact that $34Billion seems high, you’ve got to remember this is Wall Street thinking. The same Wall Street thinking that applauded a government move to secure defaults on over $300Billion in debt of Citigroup (C). Both banks have been surging lately as Investors jump back into an industry that was decimated by the credit crunch losses and prolonged recession.

For Bank Of America, and several other banks requiring more capital, the easiest thing to do would be to convert preferred shares into common equity. In BAC’s case, doing so would add approximately $28Billion in capital, according to an analyst from Morgan Stanley. The comprehensive analyst report from Morgan’s Betsy Graseck details other potential asset sales that would raise the remainder of the required capital. All in all, a situation for BAC, that looks much brighter compared to several weeks ago. It was very recently that Goldman Sachs (GS) made a splash by raising $5Billion in a stock offering, in order to use the money to repay the government’s TARP funds.

Ken Lewis having his role of Chairman and CEO separated has given shareholders a new life, and recent gains certainly helped cement realistic rebound expectations. All this, despite the the financial sector still on what can be described as slightly thicker ice.

What Investors are still most weary of is government control of the financial sector, and despite the new Administrations repeated denials of Nationalization the potential of having the US government as the largest shareholder of several major banks will do nothing to quell the argument.

For now though, When the Stress Test results are made public investors will await word of what exactly Bank Of America will do to raise capital. Till then, what $34Billion?

Disclosure: Author owns C, GS

Stock Climb continues, S&P above 900

Submitted by WC Power Tech Fund

Despite what should have been a corporate backlash against recently announced plans by President Obama to curb corporate Tax Havens and loopholes, markets brushed off worries with a shrug and kept pushing higher. This sent the Dow to the green by 200 points, while the S&P however was the big winner of the day, climbing higher by 3.3% to finish at 907.

The changing tax rules, which are estimated to bring in $210Billion in additional tax revenue over a decade, are in part a response to the growing easiness by which corporations shelter income with offshore holdings offices in countries with low to nil tax rates. By having these subsidiaries, overwhelmingly popular with Financial Institutions, which ironically are the same ones who have taken most of the $700Billion in TARP bailout money, companies can avoid paying taxes by shifting money around and through other countries. Considering a report from January pegged 83 out of the 100 biggest corporations having overseas “offices” in tax havens, the amount of money in lost tax revenue adds up.

The 2nd part of this change is driven by economics, as incentives are re-created in order to spark employment and investment in the domestic United States. Previous policies and tax incentives had been adopted to spark International Investment, however, the current unemployment situation in the US has made keeping Americans employed a top priority for the new Administration.

In other news, despite the tie up with Italian car maker Fiat, amongst other restructuring plans, Chrysler still anticipates losing nearly $5Billion in 2009, with a minute return to profitability by 2012.

Financials continued to rally again today, despite Fed Stress Test results that are likely to indicate several banks that need additional capital. Amongst those, it is being reported that Bank Of America (BAC) is looking to raise $10Billion in fresh equity capital. The stock today was up almost 20% compared to the Financial sector’s gain of nearly 6%.

The summer movie season is getting started, and that means it is the time for the popcorn blockbuster. First up is a continuation of the X-Men franchise from 20th Century Fox, a studio owned by News Corp (NWS). The X-Men comics were created by Marvel Entertainment (MVL), and the first 3 films in the franchise has grossed over $600Million in domestic box office. X-Men Origins: Wolverine tells the origin story of the most famous mutant of the group and despite the sting of a piracy leak, which put an unfinished version of the film on the Internet a whole month before release, the film managed excellent $87Million domestic and $160Million Worldwide box office tallies. The popularity of the character is surely showing among movie fans and this will likely mean a continuation of other Marvel properties that Fox has the license too. Marvel itself also stands to benefit as its license fees are typically tied to box office receipts and up front payments.

So with the March and April rallies continuing to mount, is it time to take some profits? Since March lows, the S&P is up 220 points, or 32%, and with an economic situation just barely showing some glimpses a case can be made that the markets have gotten ahead of themselves. Taking some off the table would be a prudent thing to do for Investors, however any leg down or significant down day is an opportunity as valuations are still attractive and the S&P is just broken even for the year.

Best Month since 1938, not an April Fools Joke

Submitted by WC Power Tech Fund

No Foolin’? That’s right, the S&P has had the best month since 1938 in April, as Butch & Sundance so poignantly put it all those years ago in the classic film.  The bears have been watching from the sidelines in seems all month long as this Bull Market rally will try to continue into May.

Markets Rise despite GDP data

Submitted by WC Power Tech Fund

The GDP dropping by 6.1% versus a 6.3% drop last quarter, could be seen as an improvement, but more so, it continues to paint a tepid picture of the US economy. With economists expecting a drop of 4.6%, according to the Dow Jones Newswires, the realities are still fairly uninspiring.

No matter for the markets however, as the 100-day milestone of President Obama’s term approaches, Investors are cautiously optimistic in the direction of the US economy. The Dow, Nasdaq and S&P trackers were all higher Wednesday by about 2% in early trade showcasing some of that optimism. The rally was broad, but Financial and Energy stocks led throughout the morning. Despite calls from the Fed that several banks would require more capital based on the results of the now infamous “Stress Tests”, banks have shrugged off the major concerns and have header higher.

Various sources have reported that Bank Of America (BAC) even plans to appeal, their stress test results, to the government in an effort to show it is capitalized well-enough and would not need to drastic dilute shareholders with a market offering. This despite, several bank CEOs, including BAC’s Ken Lewis, being on the hot seat with their respective jobs.

The ambitious agenda that President Barack Obama began his administration with has polarized the nation in some respects but brought it closer together in others. Despite news networks dedicated to one side of the argument or the other, the Democrats in power have shown many specific plans and remarkable resolve, and as the 100 day celebration comes to be another Obama media spectacle, the investing community is buying in. But with economic data points showing little to no improvement just yet, time will tell when recovery will truly take hold.

Technology Market Leadership Part 2: Apple beats again

Submitted by WC Power Tech Fund

With the Nasdaq pacing the other market indicators throughout the trading day, it was clear that Technology was on the mind of most Traders.  With eBay (EBAY) reporting numbers to an enthusiastic response, next in line was the mighty folks from Cupertino, waving their iPhones and Macs, sans Legal Copy (If you haven’t seen the latest I’m a Mac ads you are missing out on high comedy).

For Apple (AAPL), this quarter was met with tempered expectations.  Charts and Graphs flew across the Internet, projecting the sky was falling for the Mac.  Well not exactly falling, but some rather large chinks in the armor were showing.  Microsoft (MSFT) ads that actually garnered praise! Mac sales at a year over year drop for the first time since 2003! Apple not in the fast growing netbook Market! Pres, Androids, Berrys aplenty! Where’s Steve?  I think you get the gist, a lot of shouting and hand waving by analysts and the media, some thoughtful, most not so much.

Even, Apple’s number 1 business fan, CNBC’s Jim Goldman, in a recent piece was comparing Macs to PCs on price and intangibles, made a point to mention that Macs come with Photoshop!? Perhaps a confused slip of the tongue but nonetheless tried and true stockholders are wondering if anyone outside the Apple circle truly understands the business. And in all likelihood, that’s the reason the shares are so under appreciated and victims of manipulation and rumor.

But there’s a little something called cold hard facts, and Apple’s been providing them aplenty, quarter after quarter.  And with that, providing what seems like quarter after quarter of what I like to call 2/3rds guidance. When will the pros just forget about those last two sentences in every Apple press release.

But now to the hard hitting stuff, the news that matters, the numbers.

• Revenue: $8.16Billion vs $7.7Billion expected
• Earnings: $1.33/share vs $1.09/share expected
  
• Mac Units: 2.2Million vs 2.1-2.2 expected
  
• iPod: 11Million vs 10Million expected
  
• iPhone: 3.8Million vs 3.3Million expected

That’s as clean a sweep across the board as you can see.  The worrisome figures for most coming in was the Mac line, however this business is on solid footing now as the recent desktop line upgrades start to bring in repeat customers while the popular MacBook designs continue to impress laying Mac styling in front of and towards the general public.  In an economy where the most popular computers across the board are $300-$500 netbooks, Apple is doing very well at its “premium” price points.  The upgraded Mac Mini and the last generation MacBook give Apple some penetration in the sub-$1000 market.

iPhones continue to be big, and not only for Apple.  Analysts were scrambling to revise their iPhone estimates upwards as AT&T (T) reported very strong wireless results as part of their quarterly report.  With 1.6Million iPhone activations (only 300K less comparatively to the holiday quarter) AT&T was quick to point out that iPhone subscriber churn is extremely low (customers love their iPhones) and iPhone ARPU was 1.6 times the average (customers love spending on data plans).

Basically the iPhone’s little sister, the iPhone Touch continued to increase in popularity as the AppStore has proven to be an incredible driver of not only adoption, but also loyalty.  With Apple about to cross 1Billion applications downloaded this marketplace becomes the fastest growing software distribution channel in history.  With combined iPhone and iPod Touch sales totalling 37Million units and counting, the install base for developers is only continuing to grow. And as Apple readies the reported and rumored “iPod Touch HD”, their curveball into the netbook/tablet market, be sure it’ll be accompanied by an AppStore of its own.

How did Investors react to the news? At first nonchalantly, Apple sold off late in the day as worries seemed to creep into the stock.  After-hours however a 3% gain on solid results but sluggish guidance.  The guidance number was partially explained on the call, which I’m sure has yet been properly disseminated.  Apple is recording no Revenue from iPhones sold after their March event of iPhone software 3.0.  This is all due to some technically complex accounting rules that allow their subscription based model to yadda yadda yadda (Insert Legal Copy). In a nutshell, by doing this they can legally give iPhone users the upgrade for free.  iPod Touch users however, are stuck with another Hamilton (Doesn’t have the same ring to it as a Benjamin does it?).

Since the software is set to come out in June, that’s essentially an entire quarter of 0 recognized iPhone revenue.  Kinda sounds like it fits nicely in the gap between Apple Revenue guidance and Analyst Revenue expectations doesn’t it? Provided that the analysts have finally deciphered the enigma code that is Apple’s subscription accounting method wherein all iPhone revenues, profits etc are split amongst 8 quarters while the rest is deferred into an ever increasing cash pile which at the moment stands at $29Billion.

To be fair, Apple has begun giving Non-GAAP accounting to try to set Wall St. straight.  And by those metrics, the earnings are just staggering.

• The Current Quarter: $1.84/share
• Last Quarter: $2.58/share
• Quarter before that: $2.74/share

So the last 3 quarters of “real” earnings paint a picture of $7.16/share in earnings for a stock priced at $125. That’s a P/E of 17 in 3 Non-GAAP quarters!  Considering the $33/share in cash that Apple holds, that 3-quarter P/E ratio falls to 13. Looking ahead to the next quarter on a Non-GAAP basis and Apple is likely to earn close to $9/share (vs a comparitive estimate of the GAAP earnings of about $5.55/share).

This company is still undervalued, and while their entry into the netbook/tablet space will be closely watched, so will be the return of CEO Steve Jobs.  Rumors and stock market games aside, Apple is an incredible money printing design house and because of its accounting rules it still seems “expensive” to some.  An injustice that will hopefully be corrected as next-quarter analysts will have a full year of Non-GAAP numbers to look over and use in their predictions.  Then maybe it’ll be Apples to Apples.

Technology Market Leadership Part 1: Ebay’s Quarter

Submitted by WC Power Tech Fund

Technology was in the spotlight again today. The Nasdaq was the pace-setter in trading all day as a couple heavyweights were set to report earnings.  Online Auction pioneer Ebay (EBAY) and electronics darling Apple (AAPL) continued a slew of positive earnings reports cementing tech’s leadership role in the road to market recovery.
The auction business for Ebay had been stumbling for quite sometime, in fact even before the recession, so today’s quarterly report may just be what is needed to turn the corner here. Ebay, is trying to reign in its businesses and truly become the global auctioneer.  This was most evident of late as management outlined a plan to take its Skype Internet Phone product and churn out an IPO next year, separating the unit after years of failed synergies.  Ebay also bought a controlling stake in Gmarket, a South Korean online auction house.  Best way to break into new markets? Why, buy local of course!

These recent announcements meant Ebay’s dragging share price was finally finding some life, rising 22% over the last month, including 3% today before their numbers. Investors had more to smile about as Ebay delivered a solid report, sending shares higher by 5% in after-hours trading.

Highlights from Ebay included earnings of $357Million ($0.28/share) based on GAAP. Non-GAAP numbers, the numbers that analysts were looking at included profits of $500Million ($0.39/share). Expectations were beat by 5 cents a share and eBay also generated free cash flow of $577Million from its quarterly $2.02Billion in Revenues.  These totals point to overall revenue declines of 8% and profit declines of 11%.  Analysts however, certainly feared for worse.  Ebay guiding within expected ranges also helped its cause in after-market trade.

So where does Ebay’s growth and strength come from? PayPal, classifieds and Skype were the main drivers of Revenue year-over-year upside, so the main auction businesses still remain mostly catatonic.  But with Ebay looking to expand its online presence Investors are likely to chalk this one up to the economy.  Auction related business fell 18%, while Skype and Payments (PayPal etc.) growth on a revenue basis was 21% and 11%, respectively.

Granted the online auction slide doesn’t look all that fantastic, but with economic recovery the expectation is that this business can pick up again.  With eBay looking to expand into more markets, the additional global reach of the brand will certainly broaden the revenue stream. With its collection of shopping and auction websites, including Shopping.com and Stubhub.com et al, eBay finds its reach expanding into specific niche businesses making it that much tougher for any start up or smaller competitor. Ebay has also ramped up its online classifieds business, and that grew 23% year over year. Taking all these together, CEO John Donahoe’s vision and three-year growth targets look that much more likely.

Given eBay’s recent run-up it is intriguing but not ideal to jump into the company stock tomorrow.  However, these numbers and the guidance that came with them confirms that eBay is very much ticking and should be watched.

The Google Cash Machine

Submitted by WC Power Tech Fund

Henry Blodget of Alley Insider probably said it best after Google’s (GOOG) Calendar Q1 results crossed the wires: “cash flow will knock you silly” (Link). While the overall economic situation has admittedly hit even the mighty search giant, by controlling costs at unprecedented levels the company was able to generate $2Billion in free cash flow in the quarter. Just Staggering.

Being a heavy market share leader in North America and an even bigger leader in Europe, Google’s revenue growth had to come to a halt at some point. The global downturn and recessionary attitudes of advertisers have made that growth halt quicker than previously anticipated. Google earned $5.51Billion in revenue which was a 3% drop quarter over quarter. When factoring in Traffic Acquisition Costs, Revenue came in at $4.07Billion vs the $4.08Billion expected by the street. Pretty much in line there.

Earnings pre share blew past expectations and even increased from the December quarter on a non-gaap basis. $5.16/share this quarter versus $5.10/share last quarter and $4.84/share last year. The bottom line expands while the top line contracts, the textbook cost-cutting profit driver. This also precipitated a similar uptick in operating margin, which was at 34% and 39% on a gaap and non-gaap basis, an increase of 1% and 4% from a quarter and year ago, respectively.

The cash is the real story here though, and even though management is very conservative with its $18Billion war chest, the company now generates from its operations enough cash to buy General Motors, twice! Every 3 months! What’s even more remarkable about this is that it isn’t some oil baron, or enormous retailer, it’s a silly-named 10 year old Internet search engine that dabbles in advertising. To say Google dabbles in advertising is of-course the understatement of our still young century. The company has moved in and out of, with some great and some not so great successes, every form of advertising, but now more than ever is the Internet advertising sector helping it tremendously as rivals are sputtering.

The general nature of Internet browsing was built on the basis of tracking capabilities, and as the generation of today puts more and more of its life online advertisers are looking to target with greater accuracy driving substantially higher ROIs. And guess who’s the best at delivering high ROIs? Google of course. As dollars keep shifting online, where ROI is trackable and higher, Google stands in the best position to keep reaping the benefits. And if the company is doing this well keeping costs under control and generating cash flow in struggling economics, it’ll be that much better riding along on the road to recovery.

While there are some chinks in the armor, bears would be quick to point out Revenue decelerated for the first time ever and the company is going into 2 straight seasonally weaker quarters. A seasonality weakness that will only be exasperated by current down-trending economics. But with its main rivals continuing to stumble over and around each other (Microsoft search bleeding cash while Yahoo struggles with an identity crisis), Google can afford to run its main business efficiently and look into further growth areas such as Mobile and online productivity applications.

Google has built itself such market and mind share in search that it can certainly sustain itself on that future hardly breaking a sweat. But if DoubleClick, YouTube, Google Apps or Android start to make the company any serious cash, watch out below, because the company will then be on a blistering pace to reach its own lauded goal of being a $100Billion yearly revenue generator. While response to the latest numbers has been tepid to say the least, Google at $400/share, looking to make roughly $20 in EPS and having a free cash flow rate of about $8Billion yearly just screams must-own. With each passing quarter it is making less and less sense owning second best.

A Tale of Two Cities: Easter News and Notes

Submitted by WC Power Tech Fund

A tale of two cities, screams to be profoundly appropriate in describing the current climate of the American markets. Those two cities of course would be Detroit and New York. Symbols representing two pillars of the American workforce and economic prosperity. Both the auto and financial industries have been decimated by losses, layoffs, and market indifference, producing for some, the biggest market fall since the crash associated with the Great Depression.

Detroit’s auto stocks are still in tatters, and the news did not get much better. The US Treasury has provided General Motors (GM) with a specific set of instructions for the preparation of Bankruptcy on June 1. It looks less and less likely that GM will be able to avoid that scenario and Investors showed no confidence in any alternative as Monday’s trade saw GM give back 16% to the $1.70s.

To counter that, New York was having a fantastic session as the optimism from the Wells Fargo Corp (WFC) pre-announcement of profitability sustained financial momentum. With important earnings announcements upcoming, Goldman Sachs (GS) and Citigroup (C) Investors are seeing a renewed confidence in not only profitability, but the ability of the government to do what it has set out to do. Rid the financial books of terrible assets.

Analysts estimate Goldman to earn about $1.30/share, but the street has begun its whisper-practice and with Goldman still seen as the strongest of the Wall Street brands the company is expected to beat its own number and handily. Citigroup, having alerted the market to profitable months in January and February is looking to continue, despite the accumulated average estimate of a $0.37/share loss (according to Yahoo finance). Goldman will likely set the tone for the banks, and if others in the sector can surpass their estimates it will go a long way to support this current market rally, and instill the type of institutional confidence that is needed to make the latest gains sustainable.

Also in the news over the weekend, besides a thrilling Masters golf finish, was reporting from the Wall Street Journal (Link) that Apple’s (AAPL) iconic CEO Steve Jobs, is in fact still very much in the picture and involved in design and business decisions. Word is that Jobs was very much involved in the interface of the latest iPhone OS, version 3.0, and is also involved in the creation of the much-heralded Mac tablet/netbook device. The return of Steve Jobs, from a 6-month medical leave has been a cloud over Apple’s stock despite sales growth and product innovation from the company. The recession may have curbed consumer spending habits severely, and Apple’s premium brand did suffer, according to market research statistics, but with the company continually improving its Mac Computer and iPods lines recently and an upcoming iPhone announcement surely in June, Investors have begun to set aside worries about Jobs.

Should Jobs return on schedule and lead the next phase of iPhone evolution, expect resonant cheers and analyst upgrades on the anticipation of the next phase of Apple’s product road-map. In fact Kaufman Bros. Shaw Wu conceded Apple’s value in his latest report, bumping his price target to $150/share.

News reports of the rally’s sustainability have been mixed, with some expecting negative trends to overshadow any glimmers of recovery. Thsoe glimmers however, are due to get brighter if the financial sector continues on this path of pre-announced profitability.

Smartphone Wars to heat up this Summer

Submitted by WC Power Tech Fund

The new hotness, no not Twitter, but the smartphone, is gearing for an all hands on deck gadget war this year and beyond. While smartphones have been around for sometime, it was only until recently (read: iPhone) that momentum has picked up faster than Usain Bolt. With two main rivals now leading the charge, Research In Motion (RIM) and Apple (AAPL).

This isn’t a 2 horse race however, nor will it be over soon. As RIM executive Jim Balsillie recently said on the company’s conference call in baseball terms, the smartphone wars are somewhere in the 2nd inning. What may seem like an Apple and RIM race to win, certainly can be turned upside down with entrants from all of the world. Although smartphones account for less than a third of the phone market, they command nearly 90% of the media coverage and almost all of the growth. According to Mobile Advertising Network AdMob, smartphone share increased from 26% to 33% in the past 6 months. This growth trend seems likely to continue as popularity in these devices continue to gain and subsidies for the most popular devices reign in even the most worrisome economic consumer.

Although Nokia (NOK), may be the biggest phone maker in the world, its smartphones have yet to inspire consumer desires such as the iPhone from Apple or the Blackberry Bold from RIM. Although by sheer volume, Nokia with its range of models holds 3 of the top 5 most popular smartphones spots globally, trailing only the aforementioned iPhone. Trends are shaped by consumer decisions as well as the push from corporate entities, and as such none of these companies are standing still, nor can they afford to.

What’s on the horizon then? An analyst at Barclays is reporting that Apple has doubled iPhone production in anticipation of new models coming in June (Link). Recent iPhone speculation has pointed to not one but two phone models expected out of Cupertino this time around, conveniently coinciding with the release of Mobile OS X software version 3.0 in June. When Apple reports results for the first calendar quarter of 2009 it will surely surpass 20Million unit sales for the iPhone, not too shabby in about a year an a half.

With the AppStore becoming a global phenomenon Apple is making it extremely tough for users to ever switch away from an iPhone. If you’ve spent hard earned money on applications to make your phone function exactly how you want it to and have the features you want, you’ll of course be less tempted to switch to something else if it means losing those precious applications. When iTunes purchases only worked on iPods for all those years, it drove an upgrade cycle for the company like nothing the music industry had ever seen.

RIM, fresh off the release of a new Curve, the well-received Bold and the mixed touchscreen Storm, has had information leak out about 3 new devices codenamed Onyx, Driftwood and Magnum. This coming from a company that had shipped almost 8 million devices in its most recently announced quarterly results, sending shares higher by 20%. RIM is certainly hard at work, but its not an easy task convincing the general public the virtues of a Blackberry. Always the device of choice for the business user, as smartphones have become increasingly consumer-focused RIM had a tough balancing act to strive for. For the most part, judging by the results, RIM has done very well. Initial critical thrashing of the touchscreen Storm notwithstanding the device has been successful and further forays into iPhone touchscreen territory by RIM will likely be greatly improved. And not a soul can say negative things about the hardware RIM uses for its keyboards, they are always top-notch.

Palm (PALM) has somehow starting erasing its name from the gravestone it was surely destined to have after several quarters of significant losses. The driving force for the resurgence! A little device by the name of the Palm Pre. Wowing audiences earlier in the year with iPhone-like admiration, the Pre is set to launch in the US soon, followed by International markets later in the year. There still is much at stake for Palm, but the feedback thus far has been incredibly positive on the new device, and with the work put into Palm’s WebOS platform the company, and consumers, expect a wide range of WebOS devices going forward.

Google’s (GOOG) Android has had a rather slow start but will likely pick up steam in the latter parts of the year as not only a second handset from HTC, the company that produced the G1 for T-Mobile, is due as well as multiple devices from Samsung. With carriers in the US and abroad looking at, adopting, and testing Android, it seems only a matter of time before Google’s vision of hundreds of Android phones becomes a reality. T-Mobile is even talking about launching Home phones and netbooks running Android, and a recent story about HP had the company confirming it will be testing Android for its netbooks. The free, open-source platform has proved resilient despite some questionable early roots, and as the platform stabilizes and is available on more handsets and in more incarnations consumers will increasingly see Google’s web based products, and ads, within their mobile world.

Like Google, Micrsoft (MSFT) has only been providing software for smartphones, however all the momentum a bloated Windows Mobile has garnered in the past has seemingly been lost in the past year. With flashier devices like iPhones, Blackberrys, Androids and Pres being on consumer minds the battle remains uphill for Microsoft. A software overhaul is needed for Windows Mobile and it certainly doesn’t help the company that it announced a visual overhaul (Version 6.5) but slated it for release at the end of this year, while a proper, better Windows Mobile 7 is scheduled to come sometime in 2010. Microsoft can’t afford to wait much longer as Android gains momentum, and while the other most popular smartphones all run their own platforms.

All in all, consumers will have an abudance of choice in 2009 and beyond, and as their devices do more things they need, the world as we know it will change from the at-home/at-work Internet dominated era to the mobile/on-the-go Internet dominated era. The one constant is being connected and with each software platform making a better Internet experience each time around the debate surrounding Internet features is fading. The only way to get ahead in this game is to bring incredible new features (such as 3rd party applications) wrapped in elegant hardware that consumers feel inspired to purchase and use. While Apple and RIM are leading in that sense now, by the time this year’s crop of devices are released we may just be nearing the bottom of the 4th.

Disclosure: Author owns AAPL, GOOG, owns long-term call options on MSFT

Rally Continues past April Fools

Submitted by WC Power Tech Fund

The 2nd of April, typically a let down day for pranksters has markets rising like the Sun in the East. North American markets had spent March on an absolute tear, had the Madness from the NCAAs spread to the trading floors or was there finally something to be optimistic about?

Well, first and foremost the G20 summit has economists, investors and the media talking, which is always a good thing, especially if what’s being talked about is recovery. Not only recovery, but how to get there. The month of April has opened with positive market gains despite a jobs situation in America that if taken by the numbers seems as dire as ever. Jobless claims rose to about 670,000 in America at the end of March, as high a figure as has been seen since 1982, but the G20 leadership, and that leadership’s commitment to economic strength going forward has investors optimistic.

The latest reports out of the G20 summit have leaders close to agreements on stricter financial rules, including the use of tax havens, and a planned influx of money to the International Monetary Fund in order to help fight the global recession. This total could reach upwards of $1Trillion based on the unveiling of the plan by Britain’s Prime Minister Gordon Brown.

It isn’t just the G20 that has been providing the spark of late. In the Auto Industry, one of the hardest hit by the curbing of consumer spending, Toyota (TM) showed a sales increase of 18% in March, compared to February of this year, which led of a Vice President at the company predicting that Toyota has seen and moved past the bottom in slumping car sales. Toyota is up 14% in the last two sessions.

Piracy, a long and hotly debated issue came to the forefront of the press yesterday as a major 20th Century Fox motion picture was leaked online a month before its theatrical release. X-Men Origins: Wolverine, which is a follow-up to the hugely successful X-Men franchise for Fox and its parent News Corp (NWS) and based on the characters created by Marvel Entertainment (MVL), was set to be a summer blockbuster and tent-pole film for the studio. An unfinished, but DVD quality version of the movie somehow found its way around the Internet for fans and commentators alike to have a look. How this plays out in the month ahead is guess-work but bad word of mouth amongst the core fan-base could spell trouble for Fox, which is coming off of an abysmal 2008 movie year.

The first weekend box office for comic book movies depends heavily on the core fan-base and intelligent marketing, but if the movie doesn’t live up to expectations and the core fans get to see it in nearly completed fashion a month prior to release, the effects of piracy will be felt harder here than ever before in Hollywood. News Corp, being the giant conglomerate that it is, is unharmed for now as the stock has risen 7% today along with the broader market.

Today’s continued bullish sentiment was broad, with seemingly all sectors moving higher. The Dow, which has broken 8000 this morning is joined by its American benchmark brethren with gains of nearly 4% as of this writing. Question is, should investors be cautious for when the Sun sets in the West in the weeks ahead?

Disclosure: Author owns MVL

Final Four is set, ready for CBS!

Submitted by WC Power Tech Fund

The grandest stage in College Basketball was once again a rousing success for television network CBS Corp (CBS). Year after year the NCAA tournament is filled with drama, action, heartbreak and incredible performances, just about everything a television network would want from one of its prime-time tv shows.

Now, although the later stages of the tournament this year lacked a glass-slipper boasting Cinderella, the games attracted an impressive audience, especially online. With the help of Akamai Technologies (AKAM), CBC was able to stream all the tournament games in the highest quality it had ever streamed the event before and the results were impressive. A few statistics from BusinessInsider (Link) show traffic up 57% year over year, and streamed content up 65% on the CBS website. Certain advertising opportunities, such as the “Boss Button” also showed impressive gains with 25% growth in clicks. In comparison, for the first days of the tournament CBS saw increased television ratings of 4%.

What does this all add up to? Well for North Carolina, UConn, Michigan State and Villanova, a chance to play on the biggest stage for a National Basketball Title. For shareholders of CBS, whose value has declined over 80% in 1 year, in the midst of the recession, operating losses and dividend cuts, the hope is for a continued spark from the tournament. However this spike has all but fizzled along with the market. Today’s 13% decline has given back most of the gains made by CBS in the last 2 weeks.

With the economy still lurking in a grim down-turn and advertising being hard to come by, it is the major events that still attract audiences and advertisers and CBS has a tent-pole with March Madness. But, by the numbers, for my money the audience is moving online, and companies like content delivery network Akamai increasingly stand to benefit as higher-quality (read: more expensive) live streaming and content downloads build out an even more expansive user base in the years to come.

Disclosure: Author does not own any of the companies mentioned

US Treasury unveils details of bad-asset plan

Submitted by WC Power Tech Fund

It is almost a certainty that no one has been under as much scrutiny in recent weeks as Tim Geithner, but the Head of the US Treasury, with the complete backing of the Obama administration has finally unveiled a much talked about plan to rid banks of the toxic assets that plague their balance sheets. The sheer numbers are completely alarming, with the plan aiming to finance as much as $1Trillion in terrible and illiquid real-estate assets.

Between the lines however, is a well-thought out and highly detailed set of procedures, rules, guarantees and TARP money usages to allow both, the government to recoup taxpayers money and private investors to prosper in an economic and housing rebound. Using $75-$100Billion of bank bailout money the Treasury is setting up the Public-Private Investment Program, allowing private investment vehicles to purchase specific toxic assets from the books of major financial institutions.

The plan aims to do 2 things: Relieve structurally (for the most part) sound banks of the crippling illiquid assets and spur private investment in order to push forward an agenda of market participation and economic recovery. Banks with cleaner balance sheets will be able to invest and lend again, rely on core business to produce profits, and regain some much needed confidence across Wall Street and Main Street. Private investors, with government partnership, will be able to own these assets, with specific guarantees, in an effort to turn them into prosperous investments in the future.

Part 1: The Treasury as a mediator. The Treasury is not simple acting as a mediator in allowing private investors to talk to banks about purchasing assets, that much could’ve been done completely without the US government. What it is doing, The Treasury that is, is setting up a Legacy Loans Program to help facilitate the private investor-bank transactions. The FDIC (Federal Deposit Insurance Corp) will oversee this program and will guarantee, up to 6 times, financing for investors.

Part 2: The Treasury as a market-maker. The Legacy Securities Program portion of the unveiled plan will allow The Treasury to act as a market-maker for securities that have become so illiquid they are not longer actively traded. How do you sell a depressed asset if no one knows what it is worth and no one knows how they can buy it? This part of the plan aims to answer those specific questions.

So far, markets have responded very positively to the details of the plan, at mid-day the majors in the US were all higher by 4% (led by the financial sector up almost 7%), but only time will tell if this plan will work. Due to the nature of private investment, and the facilitation needed to create markets for illiquid securities the process will take time. So far though, in the early going, Traders are applauding the government’s move to make private investors partners with the government in investing in these assets, and not simply making the taxpayer foot another bill to clean up balance sheets.

And for those psychological investors out there, the S&P has cracked 800 today.

More on this topic (What’s this?)

Kashkari Apologizes To Taxpayers For Taking Their Money (Zero Hedge, 3/11/09)

Blogging Treasury’s Attempts At Disclosure (Zero Hedge, 3/23/09)

John Paulson takes 11.3% of AngloGold Ashanti (AU) (GreenLightAdvisor Views, 3/23/09)

Read more on Treasury at Wikinvest

Market Rally continues on Day 3 on Banking and Retail sectors

Submitted by WC Power Tech Fund

10 to 11% gains for the S&P, Nasdaq and Dow since the start of trading Tuesday as markets focused on positive news coming out of the banking and retail sectors. With the S&P up about 80 points (12%) since the 660s bottom, Traders must be wondering is it sustainable?

According to many in the banking community it just might be! Why? It’s simple, profitability. After quarterly losses multiplying not contracting, increased write-downs and more government backed dollars, some of the biggest American banks by name have issued relatively strong operational statements. Citigroup (C) and Bank Of America (BAC), both of whom have seen share prices disintegrate before their very eyes over 15 months appear to have turned the tide of losses. Both companies have pre-announced profitability in the first two months of 2009 and both expect continued operations in the black.

What does that even mean? Well shares of both banks have rallied 70% and 90%, respectively, from most recent lows, and for taxpayers who now own a 36% stake in Citigroup, maybe there’s a way out of that mess. But just a few days ago there was talk of Citigroup being replaced in the Dow Jones Index and its value as a “penny stock” weakening an already battered corporate reputation. Confidence in the banking sector, even the sliver that there is now, is crucial to returning people to the markets and jump-starting a cycle of economic expansion and price increases.

Can two months of operations at these banks be a real guiding light for the rest of year? It is of course premature to label the banks as stabilized and past their major losses, and in fact the market is full of Investors waiting for another shoe to drop, so market participants still need to exercise caution, for which quarterly results should provide additional clarity.

On the retail side, a sector that was labeled disastrous just weeks ago, has found itself well into newly renewed confidence after posting some surprising February numbers. Retail sales dropped 0.1% (up 0.7% excluding cars) over the month, which was better than the 0.4% expected by economists, assuring to some that some stabilization in this sector is occurring. This was on top of a revised January which saw an increase of 1.8% instead of the 1.0% estimate and following 5 months of Auto sales declines, January saw a slight uptick in that segment. Maybe its not as bad out there as every headline makes it out to be?

Who would think this market would be ripe for mergers and acquisitions? Roche (RHHBY) does, as it, after months of wheeling and dealing, finally found a friendly takeover number with Genentech (DNA) at $95 per share.

Markets, the economy and overall sentiment is still decidedly bearish which puts great scrutiny on any extended rally so expect some profit taking soon. At the very least, the S&P’s ability to roar back past 700 is a psychological stabilizer for many traders, and given that there was talk very recently of the S&P earning multiples falling to the 5-8 range, in line with previous grave recessions, potentially pushing the index lower than 500, the 700 number is good to see. While there are no psychologists here, that is definitely reassuring.

Time Warner Watching the Watchmen numbers

Submitted by WC Power Tech Fund

The movie business is a convoluted animal. Not only is profitability difficult to determine, the corporate structure of studios and production partners, along with a notorious history of skewered accountability on percentage based contracts, makes the exercise painstakingly complex. Add to this the lack of pure-play movie studio stocks (most being owned by conglomerate corporate parents) and the one industry thriving in a recessionary environment is the one most investors can’t grasp at.

Box office receipts in the US were a record in January of this year as going to the movies has become one of the cheaper forms of entertainment. An industry showing any kind of growth in this environment will get investors talking, and as March kicks off the Spring season for film the big name studios are shrouded from investment by corporate giants who have increasingly bigger problems of their own.

Warner Brothers is one such studio, with its parent Time Warner Inc. (TWX) struggling in the face of the recession to get substantial interest in many of its properties. Consumer spending declines are hurting the cable, broadband and print businesses as is advertising on its AOL Internet portal. Despite the incredible success of Warner Bros as a studio in 2008, highlighted by the $1Billion worldwide box office haul of The Dark Knight, Time Warner has been unable to carry any momentum as shares have fallen to $7. The move to spin off Time Warner Cable moves TWX into more of a content company in hopes of locking further shareholder value.

Warner Bros. is looking to continue its string of Hollywood successes with an adaptation of the most revered comic book of all time, Watchmen. A Hugo award winning piece of literary work, and one of Time’s 100 best novels of the 20th century, Watchmen stands out as a giant amongst superheros in the comic world. The film looks to capture audience minds in the same sense that the Dark Knight did last summer, however its skew towards an older audience and its hard R-rating will likely mute massive commercial success. With Zach Snyder helming Watchmen, critics and fans have had mixed reactions, so it will be interesting to see the staying power and first weekend might Watchmen will carry.

For a film to attain profitability in today’s industry the norm is likely to make 2-3 times its production budget. With Watchmen having a budget reportedly about $120Million and a heavy marketing campaign behind it, its take will likely need to be near $300Million for the film to make Warner Bros. any money. So will it? Yes and No, like everything Watchmen, shades of grey to each of its fascinating characters mirror shades of grey in the money trail. No less than 4 companies are a part of Watchmen the film. A very public lawsuit between Warner Bros. and 20th Century Fox (owned by News Corp (NWS)) cut Fox in on some of the box office tally. Warner Bros has partnered with Legendary pictures to finance some of the film, giving cuts of box office money away there as well, and on the International stage, Paramount Pictures (subsidiary of Viacom Inc (VIA)) is handling distribution overseas.

A complex slicing of the pie to say the least, seemingly leaving Warner Bros. out in the cold. But if the film proves successful with audiences, everyone’s happy and Time Warner may just get the last laugh. Being the owner of DC Comics, TWX owns the Watchmen graphic novel, and as interest in the film grew, sales of reprints of the graphic novel grew exponentially. With no less than 5 DVD releases for Watchmen on the upcoming slate the decision has been made to profit, and profit frequently, on the one-off film that Watchmen should and will be.

Motion Comics of the Watchmen book, where panels are slightly animated and the story is read through voice acting, has already been released on disc. Following later this month will be the animated Tales of the Black Freighter disc, which includes the Watchmen pirate story within a story literary device. And finally, 3 versions of the Watchmen film, including theatrical, director and ultimate editions. Add to that several books, toys and other Watchmen accessories and you can see Warner Bros is treating this property like a studio tent pole film.

Will it all add up to growth? With revenues of $46Billion, its hard to imagine Watchmen making a serious dent to TWX even with half of Dark Knight’s performance, however with the spin off of Time Warner Cable, TWX will become more of a content pure play, and while not simply a “movie studio” it has shown, of the major Hollywood players, to know its audience of late best with recent darker hits like “300″, “The Dark Knight” and now “Watchmen”.

So, as the Alan Moore and Dave Gibbons magnum opus consistently asks with graffiti engraved surroundings, Who Watches The Watchmen? In this case, certainly Time Warner.

Disclosure: Author holds no position in any companies mentioned.