Wednesday, October 14, 2009

So Far, So Perfect

We asked in our weekend summary:

So with an eye on earnings, I am just prospecting which day we are going to gap up 1.5% premarket on "surprisingly" good earnings. Tuesday? Wednesday? Thursday?

We have our answer: Wednesday.

The week has essentially played out to the tee as we laid out

CSX? Check

Tuesday, near monopoly CSX (CSX) reports after the bell - with Cash for Clunkers [remember we live in a subsidized economy where we steal from the future so our corporations can profit today, and we can pretend we have prosperity] should boost the railroad; further this is one of the industries with pricing power as CSX has been able to raise rates even in the face of the worst recession in half a century. Should "surprise" and make the market happy with talk of "recovery" even as railroad volume is relatively weak.

CSX had decent number last night although rail volumes were not great; they did get a boost from Cash for Clunkers; thanks taxpayers. They also said they believed the bottom was in... which was the same thing they said last quarter but it's still good enough to move stocks.

Intel? Check

We can also be "surprised" by Intel's (INTC) beat - another near monopoly, who will benefit from the weak dollar, and Asian demand - all it's missing is Cash for Computers. People will be very excited and the "Fast Money" boys on CNBC will be hyperventilating about the results; futures should surge.

Intel shows you the power of chopping workers left and right; revenue was down from last year ($10.2B to $9.4B) but net income almost came in exactly the same (down from $2.0B to $1.9B). That's the power of leverage baby... hopefully more jobs can be cut in the coming months and in return we'll receive even more profits. Gross margins also jumped nicely...

Oligarch JPMorgan? Are you kidding me

The Franchise (Jamie Dimon) will bless us Wednesday (JPM) [Jul 21: NYT - In Washinton, JPMorgan's Dimon Increasing Sway] - remember with our banks we are creating an atmosphere where all of the citizenry must be sacrificed so the banks can "out earn" their losses on the balance sheet. [Apr 20, 2009: BB&T - A Better Gauge on How Banks Will "Outearn" their Losses]

A massive beat... again, your 7 year old niece could run a bank these days, just turn on the lights and print money. The Federal Reserve lets you borrow for near nothing... you can invest in US Treasuries for risk free return OR put the money in the stock market (ahem) OR go out of the box and try to lend money to people (but why bother?). You can receive fat fees for the refinance boom (thanks Fed), you can receive fat fees for new mortgages in the fully subsidized housing market, especially first time buyers (thanks FHA). And we have not even got to their capital markets group - the tsunami of government debt we are pushing out to create "prosperity" has to be serviced by someone and now that many competitors have been vanquished in the crisis of 2008 you share the sandbox with far fewer players, so a growing pie with far fewer oligarchs to share it with. Houston, we have nirvana. With the Fed not raising rates for another year (translation, sacrificing the dollar and destroying savers in this country) it's only going to get better from here for our corporate financial lords.

Remember, tomorrow morning we will gap up on a huge Goldman Sachs beat (pssstt! act surprised when they report!), as they will make JPMorgan look like a feeble old man.... if you thought the capital markets number was great for JPM you ain't seen nothing yet.

I was bemused by this article in the - those socialists overseas are complaining about our corporate socialism... err, free market capitalism. They do not understand our system - by slashing workers, we allow them more time to shop - thus helping to drive our consumption driven economy. Our government gives the people money it does not have, companies cut costs (driving up profits), our stock market jumps, we all win here. The only thing holding back the socialists is their drive to keep people employed - a very unworthy goal. It's far better to not have jobs for your people and just have government support 20% of the population... geez, they will never learn over there.
  • US companies appear to have cut far more jobs than their European rivals during the crisis, providing a possible explanation of why American groups are performing better than their competitors across the Atlantic.
  • They said while US corporate profitability was boosted by the jobs cuts, the economy might suffer in the short-term from the shock of them.
Uhh, that is where you have it wrong... there is no suffering because that's where the government steps in offering future generations money to both consumer (and by proxy) corporations when the consumer spends that money created from thin air. We all win... just make sure you are not part of the future generation who has to eventually foot the bill.
  • Hans-Paul Bürkner, chief executive of Boston Consulting Group, said: “If you lay off people massively, you destroy confidence in the economy as a whole and inside the company.
Wrong, wrong, wrong Mr Burkner - you create prosperity by laying off people massively.
  • You see the performance of companies not picking up so dramatically in Europe because they are not so focused on the short term.”
Ok I'll give you that... we are all about the short term here.
  • “US media groups have been much more brutal in cost-cutting than the Europeans, and it is true in finance and lots of fixed-cost businesses too,”
Boo yah -brutal is all in the eyes of the beholder.
  • Unemployment in some eurozone countries, notably Germany, has risen less than expected as government-subsidised short-time working schemes allow companies to cut workers’ hours but not jobs or pay.
Once again, this is a mistake. Let the government hand out money and give the people more time to shop. Working only cuts back the number of hours a person can shop - Europeans still do not seem to get this new paradigm.
  • “We have a strategy of adapting the workforce as we go, of never having a brutal shock,” said Benoît Potier, chief executive of Air Liquide, the French industrial gases company.
There they go again with their talk of "brutal". In Europe they still believe in socialism for the people rather than socialism for the corporation. A very backwards stance...


Now remember, this is all part of the business cycle - once our multinational corporations receive enough subsidies from government, and cut enough workers to feel confidant about sustaining profits... we then return back to the beneficial part of the cycle. That is, creating new jobs... in China and India.

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