Research for Online Investors
The market was up strongly at open
this morning against an earnings miss last night by Apple (AAPL).
Earnings per share were short estimates by over 10% and sales were 6.0% below expectations. The market finished yesterday strongly on a Wall Street Journal “inside” scoop that
the Federal Reserve was ready to act aggressively to lower unemployment and increase domestic
AAPL sales were affected by slower
sales in Europe and consumers waiting to upgrade phones until the new iPhone 5 is introduced in the
fall. Before you think the sky is falling on the AAPL empire, note net
income was up 21% from the same quarter last year. AAPL fell last fall
after missing estimates because customers were waiting on the iPhone 4S.
The iPhone accounts for more than half of AAPL’s sales.
The iPhone 5 is not expected to hit
the street until the fourth quarter. The company lowered estimates for
the third quarter to $7.65 billion on $34 billion in sales. This was
below analyst’s estimates of $10.23 earnings per share on sales of $38 billion.
AAPL sold 17 million iPads in the
second quarter, filling over half the world demand for pad devices. AAPL
settled a copyright suit last month and just introduced the iPad in China last week. We recommend AAPL at less than $560.00 per share.
The company will start paying a
dividend, is growing at 20% and selling for a low multiple of less than ten times next year’s expected
You can read the Wall Street Journal
article, Fed Moves Closer to Action, which turned the market around yesterday afternoon. Talking heads made a point that the author, Jon Hilsenrath, is well connected to
insiders at the Federal Reserve. Na Na!
This is a puff piece designed to
move the market. We fear it will fail. The Federal Open Market Committee (FOMC) meets next Tuesday and
Wednesday. They set policy for the Federal Reserve. If they don’t come out with a quantitative easing program Wednesday, the market is
going to vote a fail.
More than 600 protesters in Anaheim
broke windows and stormed a City Council meeting to demonstrate against the police shooting of a suspected gang
Patrons take cover. Courtesy of Reuters
Demonstrators threw patio chairs and
bricks through five store windows in a small mall. Customers took cover
and no injuries were reported. The protesters gathered yesterday
afternoon at four p.m. What are they going to do when they have to go to
work? It always puzzles me how people have time for
this. The U.S. looks more like Greece every
New Home Sales reported this morning
and dropped to 350,000 from 382,000 last month. Last month’s number was
adjusted up by 13,000. Egan-Jones cut Italy’s credit rating to junk
today. The U.S. market is rallying. Don’t get the cart ahead of the horse.
Tomorrow morning Durable Goods
Orders are expected to drop to only a 0.4% gain in June, less than one-third the 1.3% growth rate in
May. Initial Unemployment Claims are expected to stay high at
380,000. Friday morning will see the U.S. GDP drop from 1.9% to an
expected reading of 1.5%. Some believe it may drop even
In a strange twist, the market may
rally through the end of the week if the readings are terrible. This
will be seen as building pressure on the FOMC to act next week. We don’t
think that is going to happen. The better the market looks next Monday
and Tuesday, the less reason the FOMC has to start quantitative easing.
Buy the deals but beware of the traps for now.
Can you help a
dumb Polish kid out? What does quantitative easing
John’s reply: Quantitative Easing is
the term Ben Bernanke used to describe the Fed operation of printing more money. They actually don't print it anymore, they just make an entry on their computer
balance sheet and "create" a $trillion dollars. Pretty neat
huh? They then buy Treasury bonds with this newly created
money. Now rather than just a computer entry, they have a Treasury bill
that the government owes them the money back. They can also loan money
off their balance sheet to other Federal Reserve Banks. And that is
Editor's note: We try not to
use 'insider language' in our articles. If you ever have a question, please write for clarity. Our goal
is to help you, not confuse you.
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