In recent days I have been paying special attention to shares of Blackberry maker Research in Motion (RIMM). The stock had decent earnings this quarter but some investors wanted more, which prompted a pretty significant sell off in the stock. Despite the market having recently made new yearly highs, RIMM shares have dropped from the high 80’s to the mid 50’s. The stock is down several points Monday after the analyst who covers them for Citigroup downgraded it from “buy” to “sell.”

Skipping the “hold” rating completely is pretty rare on Wall Street, but what caught my eye even more was that the analyst lowered his price target on RIMM from $100 to $50. What happened to make the company worth 50% less overnight in his view? The upcoming release of Motorola’s (MOT) Droid smart phone.

Nearly two years ago I wrote about internet search giant Google (GOOG) seeing its stock price surpass $700 per share, and as a result, become the fifth most valuable U.S. company in terms of equity market value.

Shortly thereafter the recession hit and Google shares tumbled along with everything else. The stock is making a comeback, though, after reporting strong third quarter earnings Thursday night. Analysts are once again very bullish, boosting their target prices today.

I have been prepared for a market correction for a while now, but we have yet to get one. The rally off of the March lows has reached +61% and the momentum continues to be strong. Will it continue even as companies report their third quarter earnings?

Nobody can know for sure, but over the years we have often seen a “buy on the rumor, sell on the news” mentality on Wall Street, especially during earnings season. Stocks ramp up heading into reporting season, only to fall after the news of solid results actually comes out. A similar phenomenon could certainly happen this quarter and as a result I will be carefully watching both what the numbers are, but also how the market reacts to them.

There is chatter Friday that Congress is considering new tax breaks for corporations that hire unemployed workers. On the face of it this might seem like a good idea; incentivize companies to start hiring again. The only problem is that this is yet another example of a tax cut that won’t work. Proponents of tax cuts seem to think they can solve any problem in a capitalist economy, but that argument defies logic much of the time.

I have long argued that cutting the capital gains tax from 20% to 15% (as the Republican-led Congress did under President Bush) did nothing to boost demand for stock market related investments. The argument seemed to be that lower tax rates on profits would encourage more capital being allocated to the market, but that conclusion falsely assumed that the chief reason investors buy stocks is to save money on taxes.

Here is a 35-year chart of gold prices. Based on what you see, would you want to jump onto the gold bandwagon?

I am bearish on gold over $1,000 per ounce and this chart is a good reason to at least be careful with the current precious metal of choice. The latest trend looks very familiar…

You may remember a few years back when Comcast (CMCSA) made a bid for Disney (DIS) only to be turned down. Reports Thursday have them once again making a play for a blockbuster media content deal. Initial reports out of a Hollywood website Wednesday night had Comcast buying NBC Universal outright from General Electric (GE) for $35 billion, but that story has conflicted with more reliable news sources Thursday that have Comcast forming a joint venture with GE’s NBCU division. Comcast would contribute cash ($6-$7 billion is the rumored figure) and combine its own content assets with NBCU, spin the new company off, and retain 51% ownership (with GE having the other 49%).

As Peridot Capital clients own shares in both Comcast and GE, this deal is of great interest to me. I am not convinced Comcast making a huge push into content is the right move (cable service and content creation are quite different businesses) but I can see why Comcast CEO Brian Roberts might want to expand his net.

I have written here previously that my personal fair value target for the S&P 500 index was around 1,050. I got there by using an average P/E multiple of 14-15 and projecting a “normalized” earnings run rate for the index of around $70 annually. The index has now risen 60% from its March low and hit a level of 1,074 intraday on Thursday, about 2% above my target. Naturally, the next question is “what now?”

First we need to reevaluate my initial assumptions to determine if they need to be revised. Current earnings estimates on the S&P 500 for 2009 are about $54, which is a 9% increase from 2008. Estimates going forward are significantly higher than that, at around $73 for 2010. Does my $70 still apply?

Back in December I was fortunate enough to be chosen by the editors to provide BusinessWeek magazine a value stock idea for their annual investment guide issue. My selection, beer giant Anheuser-Busch InBev, was controversial at the time due to the just-completed buyout of A-B by Belgium’s InBev, but despite how disappointed many were with the deal (especially in St. Louis where I resided for ten years) the stock of the combined company was too cheap for me to ignore.

Nearly nine months later, I figured I would publish an update on that investment idea given that many people read the BusinessWeek issue and some surely wound up purchasing the stock. Shares of Anheuser-Busch InBev (AHBIF.PK) have more than doubled in value (+119%) since the issue hit newsstands, soaring from $21 per share to a current $46 quote.

Tuesday evening we learned that gold producing giant Barrick Gold (ABX) has decided to issue $3 billion in new common equity shares in order to buy back all of its remaining gold hedges, which are currently in the red, to the tune of $5.6 billion.

In the company’s press release, Barrick explained that investors have expressed disappointment that the company has hedged 9.5 million ounces of production below market values. Barrick claims such a fact has put pressure on its share price, and therefore seems to have concluded that lifting their hedges is good for shareholders.

Many investors often confuse good products for good stocks. Surely the two can go hand in hand, but that is not always the case. Although they make great products, I am wary of standalone GPS hardware companies such as Garmin (GRMN). With smartphones quickly becoming multipurpose devices, including GPS, the market for standalone GPS devices is likely going to suffer from lower unit volumes and even more importantly, pricing pressure in the not-too-distant future.

There is no doubt that I envision a time five or ten years from now when all new cars come equipped with GPS in their dashboards, but the odds of price erosion not playing a role in such volume increases are slim. Companies seem to understand this likely future trend. In fact, Garmin is getting ready to launch its own smartphone to get into the GPS-enabled cell phone market. I feel comfortable predicting a Garmin phone will not be very successful.

A disturbing recent trend has emerged in the U.S. equity market, and many are pointing to it as a potential reason to worry that the massive market rally over the last six months may be running out of steam. Investment strategists are concerned that a recent rise in speculative trading activity is signaling that the market’s dramatic ascent is getting a bit frothy.

This kind of trading is typically characterized by lots of smaller capitalization stocks seeing massive increases in trading volumes and dramatic price swings, often on little or no headlines warranting such trading activity. Indeed, in recent weeks we have seen a lot of wild swings in small cap biotechnology stocks as well as some financial services stocks that were previously left for dead.

Per one’s request, my latest quarterly letter to Peridot Capital clients included a section on the current macro-economic outlook for the United States. The question they wanted me to address had to do with possible hyperinflation resulting from ever-increasing budget deficits at the federal level. As with any question like that, I try to completely ignore everything I have heard and instead rely on what the numbers tell me to form an opinion. Numbers don’t lie, people do.

The latest set of numbers I have looked at are very interesting and so I thought they were worth sharing. The consensus viewpoint today is that higher budget deficits will ultimately lead to higher income taxes on Americans, which is likely to hurt the economy over the intermediate to longer term. Interestingly, historical data does not necessarily support his hypothesis. Let me explain.

This seems like the kind of thing that could get more people into GM (GMGMQ.PK) showrooms and help them recapture lost market share, even if most consumers do not purchase the new Chevy Volt, due out in late 2010.

According to an Associated Press story today GM announced that the Chevy Volt rechargeable electric car should get 230 miles per gallon in city driving, more than four times the mileage of the current mileage leader, the Toyota Prius.

There are several reasons I typically ignore Wall Street analyst calls. The most compelling is the fact that sell side recommendations over the long term have been shown to underperform the market with above average volatility. Those are lose-lose metrics for investors.

Such poor performance is largely attributable to analysts being backward looking when they make research calls, despite the fact that they are supposed to be analyzing the equity market, which is a forward looking mechanism. Too many times analysts will upgrade stocks after the firms report strong numbers and vice versa, which does nothing to add to investor returns relative to the benchmark index they are trying to beat. Successful investing requires insight into the future, not reaction to the past.

It is hard to argue with the success of the “Cash for Clunkers” automobile incentive program so far. With $1 billion already blown through, Congress is working on a $2 billion extension, despite most Republicans being against the program (probably because it was a Democratic idea, not because it is not working).

Eighteen months ago Yahoo (YHOO) management rejected a $33 per share, $47.5 billion cash takeover offer from Microsoft (MSFT). Yesterday the two companies have announced a search partnership that makes Microsoft’s Bing the default search engine on Yahoo and gives Yahoo no cash upfront for the privilege. This story is likely one of the worst executive management screw-ups in U.S. corporate history.

Yahoo shares had traded up to $17 each on anticipation of a deal with Microsoft but are traded down sharply yesterday after the actual terms were announced. Yahoo will receive 88% of search revenue, while Microsoft will keep 12% for providing its technology. Yahoo saves money by not having to run its own search technology.

The U.S. stock market has rallied six percent so far this week after second quarter earnings have thus far boosted investor confidence. The four large companies getting the most attention this week have all surpassed estimates (Goldman Sachs (GS), Intel (INTC), Johnson and Johnson (JNJ), and Yum Brands (YUM)).

It is hard to paint these results with anything but a positive brush, but that has not stopped many commentators from trying to throw cold water on the initial set of earnings reports. Their core argument (which we hear all the time from the bears and really frustrates me) is that while earnings have been solid, sales have been uninspiring. “You can’t cut your way to prosperity” they say, alluding to the fact that cost cuts are helping U.S. companies exceed consensus profit expectations.

My frequency of posting has diminished lately, mainly due to the fact that nothing of much interest seems to be happening (at least from my perspective). I always err on the side of posting less rather than writing just for the sake of doing so without having much to say.

Stocks rose smartly Monday after renowned banking bear Meredith Whitney (now at her own firm) actually had positive things to say about investment banking giant Goldman Sachs (GS), upgrading the stock to a “buy” and raising her price target to $186 per share. GS shares are trading up 7 points to $149 each.

Typically when I write about individual stocks I share bullish ideas that I am either long or thinking about going long. I was recently doing some work on AutoNation (AN), however, and since the stock looks pricey to me I figured I would share a bearish case as well.

The reason for a contrarian like me to look under the hood of AutoNation is pretty straightforward. The U.S. automobile industry is obviously struggling right now but AN has strong management and the dealers are in better shape than the car makers themselves (as cost structures are more in-line without union obligations, etc). Couple that with strong buy side interest from Eddie Lampert’s ESL Investments and Bill Gates affiliated Cascade Investments and my interest was peaked.

We have been hearing warnings for years. Just wait until China stops buying our debt… the borrow and spend cycle in the U.S. will come to a grinding halt. Since the Obama Administration has already spent about $1.4 trillion (~$800 billion on stimulus and ~$600 billion on a down payment for healthcare reform), these calls are growing ever more prevalent.

Of course, China will continue to have excess cash reserves that need to be invested, and they only own a fraction — less than 10 percent — of the total U.S. debt outstanding (contrary to the widespread belief that they effectively own the United States), but it is not unreasonable to think demand would drop a bit as we continue to borrow money. The interesting thing, however, is that demand for U.S. debt is showing no signs of slowing down.