There are a lot of Fed Heads speaking lately and our question is whether they are trying to provide clarity for the market or simply trying to further muddy the water in order to keep the market guessing as to what their next move may or may not be. Everyone on the Board serves a purpose, but many market participants have to be getting annoyed at having dovish comments one day and then hints that we are close to tapering the next. It is almost like the Fed has decided to act like Congress with the Doves and Hawks battling it out like the Democrats and Republicans.
The fact that Janet Yellen has been radio silent in recent days indicates to U.S. that she is most likely being vetted, a piece of news we view favorably and think could be a boost to the market once it is announced.
Chart of the Day:
This map is from a study done in March of 2013 and it shows the expected rise in price for insurance across the U.S., by state, due to the Affordable Care Act. Our goal is to remain neutral when it comes to politics, however when we see something that just does not quite pass the "sniff test" we feel the need to call politicians out. This is most certainly one of those cases because the vast majority of the country is under the impression that Obamacare is the Unaffordable Care Act as only Massachusetts, New Jersey, New York, Rhode Island and Vermont are seeing lower premiums.
Sadly enough, these numbers from the report are being backed up by the increase in premiums we are hearing in the news from states such as Ohio, California and South Carolina. This could be just another drag on the economy once the law goes into effect and could further hurt the consumers' discretionary income.
Source: Society of Actuaries
We have economic news today and it is as follows:
- Case-Shiller 20-City Index (9:00 a.m. ET): Est: 12.0%
- FHFA Housing Price Index (9:00 a.m. ET): Est: N/A
- Consumer Confidence (10:00 a.m. ET): Est: 80.0
Asian markets finished lower today:
- All Ordinaries -- down 0.31%
- Shanghai Composite -- down 0.61%
- Nikkei 225 -- down 0.07%
- NZSE 50 -- up 0.20%
- Seoul Composite -- down 0.11%
In Europe, markets are higher this morning:
- CAC 40 -- up 0.60%
- DAX -- up 0.24%
- FTSE 100 -- up 0.17%
- OSE -- down 0.32%
We once again saw BlackBerry (BBRY) halt its shares during trading yesterday to make an announcement. Surprisingly it was to announce that the company had entered a Letter of Intent, or LOI, with Fairfax Financial to purchase the company for $9/share, which was a small premium to the company's share price. Initially shares rallied to trade above the offer price, but then reality set in that this was probably going to be the only offer which would materialize and shares gave up most of their gains. We were expected a takeunder, and although the offer price was above yesterday's open, one must remember that BlackBerry dropped a bomb late Friday which saw shares lose nearly a fifth of their value.
BlackBerry has not been the king of smartphones since Steve Jobs and Apple (AAPL) announced the first iPhone. Ever since that device was launched the premium segment of the market has migrated to Apple and left BlackBerry with a smaller and smaller market share. The latest product launch by Apple highlights this shift as their initial sales from the 5S and 5C were multiples higher than BlackBerry's latest models. Which is another reason why we have been so bullish of Apple shares as of late. The shares rose nearly 5% on the solid sales figures and had many of the talking heads discussing how Apple was back, which could be enough fuel to change investor sentiment and kickstart a new leg higher.
We are waiting for a breakout above $500/share with the belief that there is 10% upside should that occur. It would seem that $550/share would be the next stop on the chart, especially considering the latest sales figures for the company's newest phone models.
Source: Yahoo Finance
Although BlackBerry had its own issues to deal with on Monday from its announcement on Friday to the LOI announced during yesterday's trading session, other names were impacted by Apple in a big way. First up is Pandora (P), which saw shares lose over 10% of their value on strong volume of 35.6 million shares as analysts and investors alike worried about what the new iOS and its inclusion of a free version of Apple's new radio service meant. Over 200 million devices have downloaded the new iOS 7, so this could mean increased competition for Pandora to an extent that many did not think possible. Windows was used to launch Internet Explorer this way, and simply put Pandora could be the next Netscape.
The suppliers of technology and various parts for Apple's iPhone saw shares rise with both Cirrus Logic (CRUS) and ARM Holdings (ARMH) seeing their stock prices move strongly higher during the day. ARM Holdings did have a sell-off by the end of the session which saw the shares end essentially flat, but many other names were higher on the big sales numbers. The latest product launch is good news for Cirrus Logic and could create enough excitement to see the shares once again move above $30/share, however we are less interested in the companies supplying Apple and far more interested in Apple itself. The entire group shall do just fine, but long-term one wants to own the maker of the premium gear and not those who supply parts for the gear.
The stock has already bottomed and appears headed on its way towards $30/share with the recent successes that Apple has had with its latest iPhone models.
Source: Yahoo Finance
Which brings U.S. to a point about ARM Holdings this morning. We have been long-time bulls on the name and were even buyers on the latest dip, however this morning we would be looking to close this trade because we did not like the price action that took place yesterday. That, coupled with the fact that $50/share has been a point of resistance, leads U.S. to believe that this might now be dead money as the stock trades sideways for a while. With that being the case we would rather move these gains and capital into cash while we search for something with more attractive upside.