This and that-November 17, 2012

1,  An honest attempt at clarifying some of the implications of Dodd-Frank for derivatives (here).  There is this slight, understated bias against regulation that seems to always crop up in articles of a similar vein. And we talk of liberal media! One of my favorite lines pops into my head again— Instead of reading between the lines, why don’t I just read the lines!!!

2. A capability that we should  be able to replicate with the Bloombergs in the finance lab.  If we can’t trust the quality of earnings, the rate at which firms match up to analyst’s expectations is not a bad way to parse the data.  See below.

3. Related to the above chart is one that compares reported revenues to estimates as well as companies raising or lowering earnings guidance for upcoming periods. Of course, Bespoke has that data (here).

4.  For more on the earnings that were just announced go (here). For a take on the upcoming quarter go (here).  S&P earnings forecasts of over $100 per share seems ludicrous to me in the face of global economic uncertainties and contractions. I wonder who originated the expression ” Lipstick on a pig!”

As earnings turn….

IBM, Intel, then Qualcomm disappoint the tech faithful. More severe disappointers are Sandisk (well known), Riverbed (expected), Altera. Of course MSFT went up. Rumors appear to be that Iphone and Mac sales might come in light. If true, what carnage shall that cause? Schlumberger was my long earnings play from a few days ago. Worked out well if you got out at the open, which I did. Altera was the short play, unbelievably the May 38 puts opened at 1.50 after the earnings news came out. A quick almost double.

On the flip side, GDXJ, UNG and TBT either keep making news lows and/or are not all that far from all time ones. Are these value traps like RIMM and Nokia appear to be?

I nibbled  on the miners, GS and DVN all on the long side.  Said nibbling ate away half the mornings gains.  For all that negativity, the S&P was slightly up for the week that just ended.

Updating earnings news on stocks I watch.

1. CAT’s numbers were quite phenomenal and did surprise me. Their guidance was rosy, they are claiming that they see no global recession this year. That part I would tend to agree with, the rest of the world outside Europe and to some extent the US appears to be doing fine. Starbucks provides a more tepid forecast.

2. Riverbed and Juniper blow up. Riverbed is peculiar, about a month ago, they released a fairly rosy forecast and I remember going along for part of the ride up.Juniper is probably suffering from networking cutbacks by Verizon and T.

3. Netflix. I stopped watching it last year. Pity. The drop in the stock from 300+ to 70 may have been an overreaction. I remember posts saying so, but when momo people bail from a stock, it is not clear where that settles. Still,  at 20-30X earnings it remains  fairly expensive. It is not going back up to past levels without major battles along the way.

4. Chevron earnings decline, Capital one misses, Starbucks underwhelms, and the beat goes on.

Earnings-Jan 2012

Google misses on earnings, down $50+ after hours. Curiously the stock had been trading weak for the last several days, and I did look up put prices. These were  pumped up before earnings as you would expect. As an example, the Jan 600 put was tradin yesterday around $8.People are valiantly holding up MSFT and IBM, (despite revenue miss on the latter and huge run up on the former)  so that all big cap tech does not get dragged down. Usually what is bad/good for Google stays that way and may not transfer to the rest of the market.  However, the relentless push up should invite  some profit taking especially on options expiration Friday.

As some of you have heard me say before, I am not expecting a lot out of earnings season, with S&P500 estimates close to 100, I do not expect much more upside to them, stock market behavior notwithstanding. Selling high is the flip side to buying low and I am quite happy to do that with whatever I have left.