I call last night the "unlucky sevens" as every name that posted results saw its shares hammered immediately at 7%. Some worked back off the canvass like GoPro (NASDAQ:GPRO), but the fix was in; it was sell first, ask questions later. In fact, it was amazing to see big beats from Microsoft (NASDAQ:MSFT) and Apple (OTC:APPL), and a top and bottom beat from Chipotle triggered selling (only to reverse higher), yet the ugliest results of all initially sent shares of Yahoo higher. Go figure!
The earnings season is the toughest time to be an investor because it's not only about the results; it also includes guidance and emotions.
In the meantime, if Apple is the epitome of failure, how do I get at the back of the line? According to the World Bank, Apple's cash hoard is now $203 billion or equal to the gross domestic product (NYSEMKT:GDP) of Qatar and greater than the GDP of 138 countries. Guidance was conservative and there is a chance the company sold between four and five million watches. However, it is all about the iPhone, China, and a gross margin.
- 47.5 iPhones (consensus 48 million)
- China sales 100%+
- Gross Margin 39.7 (consensus 39.5)
Even with the hits to major names that represent the new economy, we are witnessing the changing of the guard.
Blue chips are bluer and slower and simply do not grow anymore. Yes, these names generate cash like utilities, but that does not carry markets or move stocks. I think International Business Machines (NYSE:IBM) can reinvent itself once more, but I am not sure if this is the right management team to get it done, just as General Electric (NYSE:GE) has had the wrong management team since Jack Welch retired. And I am not sure in this politically correct world if they fire a woman CEO sooner rather than later (long time shareholders of Yahoo are asking the same question), but I will give it just one or two more reports to show it and to prove it.
In the meantime, the new economy is here and there has to be better ways to discern that in the market. The folks who cobble together the Dow are always about five to ten years late. There are still Dow names worth owning, but it is clear when investing for growth, it is nowhere to be seen in blue chips, save for Boeing (NYSE:BA).
Let's Beat Poverty
Yesterday, the United States officially opened the Cuban Embassy in Washington D.C. as President Obama continues to push for full relationships under the premise that after more than 50 years, the embargo hasn't worked, noting the level of poverty on the island nation.
The same year the Cuban embargo was enacted, a socialist named Michael Harrington published "The Other America" that shocked the nation that didn't see the depths of poverty in their midst. The answer was classic socialism - throw a lot of money at the problem and as much guilt as could be spread around.
- Food stamps
- Job Corp
- Vista Program
- Federal Subsidies for schools
- Social Security disability
It is hard to know if these programs helped initially since the rate of poverty was already in freefall from the end of WWII. It is rather clear, the more money and programs thrown at the issue of poverty, the smaller the impact has been.
In fact, poverty among single-parent families with children has surged while married couples are hovering right around the 1964 level.
The major equity indices are lower this morning. Unlike yesterday's news from blue chip industrial names, which were overwhelmingly positive with most beating the street and hiking guidance, tech earnings after the bell are causing the market to be under pressure.
Whirlpool (NYSE:WHR), Owens Corning (NYSE:OC), Boeing , and Illinois Tool Works (NYSE:ITW), just to name a few, act great. This is not going to stop the market from opening lower but point to pockets of strength and growth beyond the ridiculous hype that Apple selling 47.5 million iPhones in three months is "weak."
We're not going to force the issue and are raising some cash. This morning, we asked subscribers to our Hotline service to take a 40% profit on Facebook.