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Time to Bargain Hunt with Apple - or Time to Wait on the Sidelines?

2015-08-26T07:20:00.003-07:00

I've seen a lot of investors doing some unwise things during this market thrashing, as they're already calling to search for undervalued stocks to take a position in. Some with a position in Apple (AAPL) are pushing for an immediate increase in the number of shares acquired because of the recent correction.

Yet the fact Apple has been under pressure since the latter part of April, falling about 14 percent since that time (about 19 percent in the last 3 months). Economic news from China since then has not been helping the prospects for the company. It appears it is premature to add to a position in Apple.

On Monday Apple fell to under $95.00 per share, which prompted CEO Tim Cook to take to contact Jim Cramer to reinforce his view that the company has been doing well in China during the last couple of months, even though China's market crashed and exports have plummeted by over 8 percent. When I heard that, it made me question whether or not Cook could get into trouble with the SEC for taking that action.

The fact Cook felt the need to do this during a quarter definitely points to his concern Apple shares could take a beating, which even if unwarranted, could take time to recover from. That would also be exasperated by a earnings report that underwhelmed investors during the current quarter.

Even though some investors probably did well for an entry point Monday, it was luck that brought it about. We shouldn't be rolling the dice with our capital, and in my view we need to wait before seeing where this market and economy is going.

Mood over Apple

When talking about the mood for investors over Apple, I'm talking outside of those that have such an emotional attachment it makes it difficult to bypass the rhetoric and get to the reality of how the company is being looked at.

In general, the outlook for Apple is weaker than it has been, with the majority of that coming from the perceived weakness in China and how that may affect iPhone sales in the future.

That came on the heels of a trend by Chinese consumers to upgrade from lower-price smartphone models to iPhones. With China driving so much of the attention, it was impossible for Apple to escape being lumped in with the Chinese economy.

When combining this recent negative outlook with the correction, it definitely will offer an opportunity for Apple investors to get in at a good price. The question is whether there is still more room for the share price to drop, or if it's at levels it is a good time to get in.

I'm not referring to attempting to time a bottom here, but rather referencing whether or not this is more of a longer-term trend, and what will happen to the stock if it underperforms in China during this quarter; no matter what Tim Cook says about its current performance in China. We need to see numbers, not cheerleading to be convinced.

If investors punish the stock again, it could result in shares leveling off and not returning to current levels for a prolonged period of time. Most of that will be determined by iPhone sales in China during this quarter, and how they measure against expectations.

Apple's performance

With Apple being Apple, it's going to rightfully get rewarded or punished on exceeding or missing expectations disproportionately to other companies.

So when it didn't meet expectations in the latest quarter, its share price was pushed down. That is especially true concerning China, which is considered the growth market for Apple.

While iPhone sales did well, generating unit growth of 87 percent, it wasn't enough to placate investors, who in many cases interpreted that as disappointing performance. Overall, growth in China for Apple was up 112 percent year-over-year, surpassing over $13 billion.

Because of sales slowing down below expectations, it's very probable the share price of Apple will fall further before convincing investors the performance of the company in China is more sustainable than believed. That convincing won't come from cheerleaders, it'll have to come from performance as reflected in the numbers.

Valuation

Before getting into the valuation of Apple, I do think for those willing to hold Apple for the longer term, current prices provide some safety for the reason the stock is undervalued in my view.

Having said that, valuating Apple has to assume whether or not one believes it will still do well in China over the long term. At this time investors aren't convinced, which is why the share price has been under pressure since the latter part of April, 2015. That's why I'm saying the next earnings report will be crucial to how Apple does over the next year or more, depending on what the numbers tell us.

My valuation is on the assumption iPhone sales in China will remain robust, with the rest of the company performing in line with expectations.

The 52-week high for Apple is $134.54, which it reached in the latter part of April. That represents a little more value than I assign to the company, but not too far off.

If you take away the disappointing iPhone sales in China last quarter, the 52-week high is a little strong. That has to be balanced with some other factors that I think aren't being attributed to its valuation as they should.

For example, Apple ended last quarter with a cash balance exceeding $200 billion after it paid out dividends and bought back a lot of stock. That means the company still has extraordinary ability to generate a lot of cash even when it doesn't meet expectations.

While investors attributed a lot of their valuation to iPhone sales in China, I don't think they took into account the amount of cash the company can still produce on a consistent basis. This is where the undervaluation resides, and where it could surprise to the upside if - and that's a big if - China iPhone sales meet expectations going forward. This is the key catalyst determining the value of the company in the majority of investors' eyes.

Apple should be valued in a range of $127.00 to $129.00 on its cash generation and removal of shares out of the market.

Since investors aren't valuing that in at this time, it offers an opportunity to get in a a very good price.

Conclusion

My concern about Apple isn't over its ability to sell iPhones in China, but whether or not it can meet the high expectations investors have of it there. Rather, my concern is how the share price will be punished the Chinese economy slows even more, which it already is showing signs of, and if Chinese consumers still have the confidence in the economy to spend on higher end items like an iPhone.

If data suggest the Chinese are slowing their upgrades to iPhones, along with first-time sales, this will be a difficult headwind to overcome, even if it isn't considered a rational response by other investors.

Why this is important in the current market environment for Apple, is if investors get in now without knowing which direction China's sales are really going as measured by expectations, Apple's share price could become range bound and drop further, which could lock up capital for a significant period of time.

China's economy is slowing. There is no doubt about that. Now it must be determined the impact that will have on iPhone sales as Apple attempts to further expand its market share there.

Valuations won't matter if investors don't see the overall pieces of the company forming a larger whole than believed. It looks like iPhone sales in China are the metric the vast majority of investors are looking at for Apple. So while it looks like a bargain at these prices, it may take a long time for that to be reflected in the share price if Chinese sales fail to meet expectations.

On the other hand, it could surge beyond the valuation I see the company at if it is able to beat in China.

There is too much volatility in the market now to take a position in Apple without it being a roll of the dice. It's highly likely the market gyrations are far from over, and if capital is invested without waiting, it's locked in without knowing how deep and long this correction is going to take.

Why China's Silk Road Could Be Bad News For The Middle Kingdom

2015-06-25T08:29:00.000-07:00

Weak consumer spending is forcing China's leadership to go back to potential boondoggle infrastructure projects.
No guarantee "Silk Road" projects will be profitable if completed.
Ghost cities still remain mostly empty after over $2 trillion spent to build them.

Even though the official numbers from China's National Bureau of Statistics suggest consumption is moving steadily along, accounting for 51.2 percent of GDP, and following on the heels of the 12 percent boost in retail sales in 2014, there are questions these numbers may not reflect the reality on the ground.

It has been pointed out that "private surveys and results from consumer product companies" paint a different picture; one that draws the conclusion that consumer spending has been level or contracting.

Other data contributing to this as being the likely scenario are the PPI in April dropped for the 37th month in a row, and manufacturing in China, with a 49.2 reading in May (-4.6%, missing analysts expectations of -4.4%), confirms it is contracting faster than believed.

read more ...

Currency Battle Royal as Asia Fights for Export Dominance

2015-06-15T13:39:00.000-07:00

There are a number of reason Asian currencies have been falling recently, with the most obvious being expectations the Federal Reserve will raise interest rates in the latter part of 2015.

Other factors attributed to weaker Asian currencies include pressure from local businesses, demand for electronics gadgets fell, MERS, funds pulling money from emerging markets, Japanese yen, and a potential Greek default. I'll break down how these are having an effect country-by-country in a moment.

read more ...

How Verizon May Have Pulled One Over On Content Giants

2015-04-28T21:03:00.000-07:00

I've been watching with interest the seeming outrage from Disney (NYSE:DIS) and 21st Century Fox (NASDAQ:FOX) (FOX) especially, concerning the alleged breaking of an existing content agreement between them and Verizon (NYSE:VZ).

The basic kerfuffle is over whether or not existing agreements allow Verizon to offer sports channels in bundles separate from other channels by the respective content owners. Disney, Fox, and others claim it violates existing agreements, while Verizon says it doesn't.

Verizon won't back down from its FiOS Custom TV,, as Chief Financial Officer Fran Shammo said: "We have launched the product, we are not retracting it, and we believe we are in our legal rights to launch it."

read more...

Netflix: Why We Need To Take A Closer Look

2015-04-28T21:01:00.001-07:00

It's somewhat alarming to see the majority of financial writers not only parrot the talking points of Netflix (NASDAQ:NFLX) leadership, but to uncritically point to the one single element the majority of investors in the company are basing decisions on, without balancing it with a healthy dose of skepticism in light of a number of weak data pointing to things that should concern those interested in investing money in the company.

The basic premise is Netflix will continue to grow its international subscription base, and the reason it did so poorly with earnings is because of currency issues. While there is truth to that assertion, the way it is being packaged, it appears as thought if it weren't for that, the company would have exceeded expectations.

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Why Google Is Becoming A Victim Of Its Own Search Success

2015-04-28T20:59:00.000-07:00

The ongoing antitrust investigation by the European Union of Google (NASDAQ:GOOG) (NASDAQ:GOOGL) points to the problem a superior competitor can easily undergo when it supplies a product consumers and businesses want, and provide it far better than its competition.

It eventually reaches the place where it dominates a market, and the inevitable cries of antitrust violations emerge from those that can't keep up with the competition; such as in the case of Google against all of its competitors.

In the case of the EU, it hasn't yet been revealed as to what it is specifically concerned with over Google, although the regulating arm of the region, the European Commission, is asking for permission to publish the complaints it has received over the years.

According to a recent report in The Wall Street Journal, the EU is close to filing antitrust charges against the tech giant, with some suggesting a fine could reach as high as $6 billion. A bigger concern to me would be what type of fixes would be required from Google, and how that would have an impact on the future revenue and earnings of the company.

Presumably this is similar to antitrust concerns the US Federal Trade Commission had in 2012 when it was considering filing antitrust charges against Google for allegedly giving its own sites preferred treatment in the results. Horrors!

read more...

Guns And Ammo Sales Soar As Debate Rages

2013-05-15T11:01:00.000-07:00

There is little, if any, possibility of compromise on one side or the other of the gun debate, and so the vast majority of minds have already been made up as to where they stand on the polarizing issue.

As to how that affects companies selling guns and/or ammunition, it actually makes it fairly easy to know the market and resultant supply and demand equation associated with it.

Having said that, the raw emotion that comes with the territory requires those investing in gun or ammo companies to wade through the clutter and look closely at the data. As a matter of fact, if investors were to approach all companies they invest in in the way gun companies must be approached, they would be much more successful in their choices. By that I mean removing the hype accompanying most firms and look at it as objectively as humanly possible.

In reference to guns, that must be done by not accepting data that is revealed in half-truths and omissions. For example, the number usually thrown out for annual deaths by guns in the United States is about 30,000. The insinuation is there are 30,000 homicides in the U.S. every year. That's not true at all. About two-thirds of those deaths are suicides, so you have to immediately shave off about 20,000 deaths to get an accurate picture.

If people reach the place of taking their own lives - unless there's intervention of some sort - they'll find a way to do it. It's not like it's something new in the world because of there being guns available.

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Prescription Drugs and Gun Deaths

Prescription drugs are coming under increasing scrutiny, not only for their role in many multiple homicides, but even more so for the cause of deaths from those ingesting the legal drugs.

The number of annual suicide deaths from prescription drugs are about 16,000 a year, with deaths from all prescription drug use over 100,000 annually. There is no doubt there are far more suicides from drug use, but only those with evidence of "force against oneself" are identified as suicides. Substance abuse that is considered unintentional, which are by far the majority of prescription drug deaths, aren't included in suicide statistics, even though the drugs are known to have been radically abused by the one taking them.

With women 50 and older alone, from 2005 to 2009 the number of suicide attempts using prescription drugs rose from 11,235 to 16,757. Women are more likely to take their lives using prescription drugs than men.

All of this is said to note that annual prescription drug deaths - whether accidental or intentional - are about ten times more than homicides using firearms.

As a matter of fact, many multiple homicides have included the perpetrators being under the influence of prescription drugs; a fact that is underreported by mainstream media outlets and protected by the industry. A number of other multiple homicides using guns are suspected to have had the murderer being under the influence of prescription drugs, but officials haven't denied or confirmed that either way.

Gun Crimes Plunging

According to Bureau of Justice Statistics, the number of homicides involving firearms has plummeted from 1993 to 2011. Here are some of the highlights of the study:

Firearm-related homicides declined 39%, from 18,253 in 1993 to 11,101 in 2011.

Nonfatal firearm crimes declined 69%, from 1.5 million victimizations in 1993 to 467,300 victimizations in 2011.

Firearm violence accounted for about 70% of all homicides and less than 10% of all nonfatal violent crime from 1993 to 2011.

From 1993 to 2011, about 70% to 80% of firearm homicides and 90% of nonfatal firearm victimizations were committed with a handgun.

Source of Guns

Another set of facts, according to a DOJ survey, is the vast majority of criminals using guns in homicides and other crimes didn't get their firearms through so-called gun show "loopholes."

The most recent statistics available from the DOJ - whereby they surveyed prison inmates in 2004 - found that 40 percent of inmates got their guns illegally; 37 percent said they obtained their guns from family or friends; and 10 percent acquired them from a pawnshop or retail outlet. How many obtained their guns from a gun show or at a flea market? A miniscule 2 percent. Those are the facts.

All of this is mentioned in order to separate the wheat from the chaff when analyzing the gun and ammunition industry.

Media and the Gun Control Battle

The opposing forces in the gun battle are using the media to rally the troops and influence public opinion.

Gun control advocates use the child-victim theme as their main lever, while 2nd Amendment supporters go the route of the results of past historical gun grabs, which were followed by mass exterminations.

There are other ways they battle it out, but these are the go-to themes when needing to get emotions stirred up by the respective base of each side. Below are images representing both points of view. As you can see, there isn't much in the way of common ground to work with either side, as they view it as life or death from different perspectives.

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Media and politics - whether accurate or not - do play a big part in the firearms debate, and so must be included in deciding on whether or not to invest in the sector.

Nonetheless, that's related to how those watching the debate are being socialized into accepting the proposed narrative of each side. Over time what really matters is whether or not it's having an effect on the sales of guns and ammunition. In that regard the gun and ammunition manufacturers are winning hands down, as are the retailers selling them.

Pensions Divesting of Gun-Related Stocks: Does it Matter?

Another skirmish in the overall gun battle is the announcements by pension funds located in ultra-liberal states that they're divesting of stocks they've held that manufacture guns or ammunition.

The latest pension fund to make that decision is the New York City Employees' Retirement System, which announced it is divesting its holdings in the industry. Odd that they did that after a big jump in share price over the last year or so. In January CalSTRS, the California State Teachers' Retirement System, took similar steps.

These are pretty much completely irrelevant to the gun industry, as the majority of people in these two states already have made their minds up on the issue. As for the influence factor beyond the borders of the states, there could be some value there, but there aren't that many undecided people at this time, so it's very minimal as to its effects, other than making a statement to those already convinced. It's also likely that behind the scenes, gun control advocates pressured the pension funds to take these steps.

Gun and Ammo Supply and Demand

Taking in the overall scenario, the outcome has been a huge and growing demand for firearms and ammunition, which has not only driven up the price, but also resulted in shortages, especially with ammo.

There are questions surrounding the Department of Homeland Security bidding on 1.2 billion rounds of ammunition, which has created a shortage while driving up prices. If the purpose was to slow down sales by creating an artificial shortage of ammunition, it has backfired, as gun enthusiasts continue to line up on days retailers receive ammo in order to get their desired ammunition. Some also buy up some ammo whether they need it or not, presumably to resell to friends or possibly trading purposes. Whatever the reason, manufacturers can't keep up with the soaring demand for ammunition.

Included in the ongoing battle for background checks and widening registration requirements is fear, which is driving gun owners to stock up. While it has resulted in those who never owned guns to buy them and the ammunition associated with them, this trend is being driven primarily by existing gun owners by far.

With Obama in office, it can be counted on that this won't change any time soon. This makes the next three years or so one of the more predictable corporate trends that can be counted on.

The downside risk would be if the politics of the issue changed and major new laws were implemented. Yet in the short term, that would be a positive for the industry, as it would generate even more sales.

For the firearms and ammunition industry, there is nothing to suggest a slowdown in demand anytime in the near future.

Investment Implications

What's very informative about the gun and ammo sector is it appears companies that provide the ammunition believe the huge demand for the product is going to be a temporary one. That conclusion is reached because the manufacturers aren't adding capacity.

By not adding capacity I'm referring to building larger facilities to meet the surging demand. Some companies have added hundreds of employees to the workforce, as well as boosting overtime. In some cases they're running the factories day and night. Even so, they aren't looking at increasing the physical operations at this time. That could be a mistake in the years ahead if the political climate and opposing forces continue to battle it out while checkmating one another.

As for the manufacturers, the public companies I've analyzed appear to be those experiencing the most pressure. The retailers, while getting some flack from those opposing the 2nd Amendment, aren't the main focus of opponents of the right to bear arms.

That means Sturm Ruger (RGR) and Smith & Wesson (SWHC) - as far as publicly traded companies go - are those facing more scrutiny and pressure. There are far more private gun manufacturers than these two - which is important from a competitive point of view - but as for media focus, they aren't as important in the public opinion wars at the national level, although locally they may get more heat.

As you can see in the two charts below, Sturm Ruger and Smith & Wesson - because of the exposure to news cycles - have been very volatile over the last year, although they have gradually moved up even after big spikes and declines on some trading days. That will be the way the share prices of the two companies perform going forward as well. Thus it's imperative to get in on the dips, as it could take some time to recover if you invest after big upward moves. You can see that with December sales for Sturm Ruger, and for seasonal sales from October through December with Smith & Wesson. Buying before people start thinking in terms of Christmas is important with these two stocks. Newtown of course was a part of the uptick in December sales.

Sturm Ruger

Smith & Wesson

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Alliant Techsystems (ATK) serves the aerospace/defense industry, which a significant part of that being the production of ammunition for the hunting and sports market. That includes ancillary goods such as gun care products, scopes, targets, and reloading equipment, among other related items.

ATK recently announced it is going to acquire Caliber Co., the parent company of Savage Sports. The price of $315 million represents a 5.5 multiple of its trailing-12-month EBITDA. Savage is one of the leading manufacturers of shotguns and hunting rifles, and fits in well with the overall product mix of Alliant. Adding a gun manufacturer to the ammunition line is a good move.

The company said it thinks Savage will be accretive to its current fiscal year earnings per share. Financing of the deal came from existing cash and its current credit facility. As you can see below, this should boost an already highly successful company.

Alliant Techsystems

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Another good option is Olin Corporation (OLN), which generates about 37 percent of its revenue from gun and ammunition sales. The other revenue comes from chlorine and alkaline products.

Over the last year, Olin has performed very well, with its Winchester unit helping boost the company.

Still, one has to view Olin differently than the rest of the players in this sector, as its totally different chemical units make it unique. Since 63 percent of revenue comes from chemicals, it must be primarily considered a investment in that sector rather than in firearms, although ongoing demand could easily boost revenue from the Winchester unit.

Consequently, this is a more predictable play than the pure gun and ammunition manufacturers over the last year.

Olin

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Another awesome stock to consider is Cabela's (CAB), which may be one of the best in this grouping here. The outdoors company has more than doubled its share price over the last year, and appears to have a lot of room to grow.

Gun and ammunition sales have helped them outperform, but what makes them even more compelling is when you strip out gun and ammunition sales, the company's same store sales still climbed by 9 percent, with 10 out of 13 merchandise subcategories increasing. This has partly to do with the perception the economy has been improving.

Along with impressive revenue growth is just as impressive earnings growth. Net income has also been solid. Cash flow from operations has also been up. One area of risk is its debt load, but the rest of the positives will overcome that if the solid performance of the company continues on.

The company said in its recent conference call that it's keeping exterior guidance in place, suggesting they may still have some significant upside potential, which will give the share price of the stock a big boost if it outperforms.

Cabela's

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Finally, Wal-Mart (WMT), which is the biggest player in many sectors, is also one of the largest sellers of firearms and ammunition in the world. Obviously it'll be less affected by direct sales because of its enormous size, but the key factor there is the market it serves, which for the most part in America, is located in gun-supporting regions of the country.

That means potential for ancillary sales when people come in looking for ammunition and guns. The jump in sales and good will from its customer base is reflected in the nice move up in share price from a year ago.

Wal-Mart

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Risks

With such a positive environment for gun and ammunition sales, is there any risk in the near or medium term for companies selling guns and ammunition? The answer is yes, but not for the reasons I've been reading some writers assert.

According to them, it's the implementation of gun control measures which would snuff out the growth. Not only is that the furthest from the truth, it's the exact opposite.

What would stop this extraordinary growth? It would be to stop the aggressive attempt to restrict guns and gun ownership. As long as the public perceives an attack on the right to bear arms, they're going to continue to stock up on guns and ammo. If politicians would stop their attempts to regulate guns, most of the fears would subside and demand would be cut back.

The reason I say gun control laws wouldn't stop growth is people would continue to buy firearms and ammo whether laws are put in place or not. It would just be done from different outlets than they are buying from now. This could be a risk to gun retailers, but not to gun manufacturers.

In my view risk would be to lower the hype and rhetoric from some government mouthpieces and entities, which would cause gun owners to relax and ease up on buying guns and ammunition.

Since that's highly unlikely, as well as it being unlikely any significant legislation that would be a game changer being implemented, it looks like companies with strong exposure to guns and ammunition will continue to do well.

Higher prices aren't a risk, as they have continued to climb without making a dent in the rising demand. Other than food and water, gun enthusiasts consider firearms and ammunition as one of the most necessary items to own. That isn't going to change.

Competition

As mentioned earlier, a lot of the competition in the sector is from private companies, which are numerous around the country.

In the current atmosphere, that has had absolutely zero effect on demand and sales. Demand is so overwhelming that everyone, especially in the ammo field, have enormous supply challenges. This won't change any time soon.

There is no advantage here for the majority of companies, as whoever can provide the ammo and desired firearms will be the companies which get the sales. To a lesser extent this is true with some firearms, with brands playing a bigger role there.

Conclusion

While concerns over potential gun legislation has driven gun and ammunition demand, a secondary factor has been concerns over the economy and the resultant crime that always grows in response to economic weakness. That is going to remain the trend in the near future.

The main demand drive will remain gun control efforts though, and as long as the aggressive positioning and push continues on from politicians, and is reinforced by mainstream media outlets, there is no way the demand for guns and ammunitions is going to subside. After all, what would be the catalyst if things continue on as they now are?

Even after gun control efforts are swept aside by lawmakers, gun control advocates assert they'll never give up. While that may be true politically, it plays into the gun and ammunition demand scenario.

It's apparent there will be no disruptive gun control legislation in the near future, and those companies with exposure to guns and ammunition will continue to benefit from that reality.

Big Tech Starting To Bust A Move

2013-05-07T08:27:00.001-07:00

With the almost zero interest rates in place by the Federal Reserve, investors have been looking to blue chips and dividends as their main places to park their capital. This is why companies like Coca-Cola Company (KO), Wal-Mart (WMT), Pfizer (PFE) and Johnson & Johnson (JNJ) have been doing so well over the last six months to a year. This has happened because they're continually being forced out of bonds and cash into better-performing equities.

Here's how they've performed over the last year:

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Recently the moved towards safer and better producing dividend companies has changed, as more and more capital is being allocated to the big tech sector, evidenced by upward moves in firms like Apple (AAPL), Microsoft (MSFT), Intel (INTC) and IBM (IBM). This began to happen from about April 15 to April 22.

Below are the charts of these four tech companies to confirm they have started to move up in a way that looks sustainable.

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I know that IBM, after its recent earnings report took a big hit, and is still below its 50-day moving average, yet it began to move in unison with the other big tech stocks, confirming there is definitely a more positive outlook for tech, as well as a growing risk appetite by main street.

That tells me investors, because of move up in dividend-paying blue chips, are ready to take on a little more risk, and the upward move in big tech stocks implies that's where their money is now headed. It also tells you they may believe the blue chips have soared so high they may not have a lot more room to run. They may have peaked. Either way, money is starting to migrate to big tech, and it looks like they're ready for a nice run.

Over the last couple of weeks the big tech stocks have been outperforming the blue chips, lending credence to my supposition. The only question appears to be if they will pull back some in the short term, or we've entered fully into the trend already. Whichever it is, big tech companies are close to rockin'.

Apple

Apple, as with all these companies have unique circumstances, but I'm going to use the tech giant as a bellwether for the overall big tech industry to unveil why they're overall poised for an upward, bullish trend.

There are two important elements to consider with Apple and all the big tech companies, and that is the current price levels and the net cash positions of the companies (cash on hand minus debt).

The numbers used in this article will obviously change, but if you want to know the net cash position of any company you're interested in investing in, subtract debt from cash on hand and you'll know the strength or weakness in that regard.

Current Price Levels and Value

As you can see from the charts above, the current price levels of big tech companies are very attractive in light of the Federal Reserve policies and macro-economic conditions, as well as the net cash positions of the stronger companies.

The best way to see the value in a company is via its price-to-earnings (P/E) ratio.

Consider the amount of cash on hand with the large tech companies, as that alters the way we should look at the price-to-earnings ratio of each company.

With Apple, which is flush with cash, it dramatically changes the P/E equation. When I was checking out Apple's net cash position, the market value of the company was close to $415 billion. Cash on hand at that time was about $137 billion. You subtract

that from the $415 billion and the company is trading at only 6.7 times future earnings. That's an incredible bargain, to say the least.

So there is the combination of incredibly cheap stocks at the beginning of a significant uptrend. The sector has everything going for it at this time, and that should drive the share price of the companies up in a big way. It appears this ride has just begun.

Other Tech Companies

There are a number of tech companies that fit under this trend umbrella, including Google (GOOG), Microsoft and Cisco (CSCO).

Google is the most expensive of these, with a forward price-to-earnings ratio of 12.7. It has a market cap of $273.6 billion as of this writing, with cash on hand of $48.1 billion.

Microsoft is much cheaper, with a forward price-to-earnings ratio of 8.1. It's market cap is $276.4 billion, with cash on hand of $68.3 billion.

Cisco's forward price-to-earnings ratio is a paltry 5.8. It's market cap is $111.5 billion, with cash on hand of $46.4 billion.

There are other companies, but these are all set for a nice boost in share price, and that appears to be a trend that will go on over the next 6 to 12 months, possibly even longer. The blue chip trend lasted for about a year or so, and if that's an indicator that can be trusted, the big tech trend could experience the same time frame.

ProShares Ultra Technology (ROM)

One example of a technology ETF that will also do very well over the next year or so is ProShares Ultra Technology.

(click to enlarge)

Calculating the forward price-to-earnings ratio in the larger holdings of the fund, the average stands at only 11. That's also an amazing ratio, which bodes well for those investing in this and similar big tech ETFs.

(click to enlarge)

Unsurprisingly, ProShares Ultra Technology has moved in unison with the big tech stocks.

Conclusion

To me trends are the most important element in the share price movement of companies, as they will overcome all sorts of data and opposition when the trend takes hold. Trends defy logic, and can pull up even less attractive companies on momentum and sector favor.

That's what's happening in the big tech sector at this time, and we're just at the beginning of a big move.

Other than end-of-the-world scenarios, I don't see anything will stop this from going forward.

About the only risk I see is in when it'll happen. Is it possible there could be a temporary pullback? Absolutely. In that case it's a matter of hanging on if you're already in and waiting for the rebound.

The other possible risk is if this is a misreading of investment sentiment towards big tech. It doesn't appear to be, as the overall movement of the sector over the last couple of weeks is unlikely to be a fluke or anomaly, and so should be something

that takes hold to the benefit of those willing to invest in the sector.

As for Apple itself, the company will definitely rebound on the trend, but the lack of any known pipeline will eventually weigh again on the stock. In the meantime, it may not become a skyscraper in light of the existing conditions, but it will definitely go higher because of the current price levels and the big tech trend.

We are at the crux of this new trend, and while it may be a little early (maybe), it's very close to being time to get into the sector before it begins to soar.

Remember this is happening because of an increased risk appetite, attractive entry points, and low forward price-to-earnings ratios.

GE (GE), Morgan Stanley (MS) Up, Intel (INTC), American Express (AXP) Down

2013-01-20T09:34:00.000-08:00

As earnings season continues on, the unfolding story is one of a mixed bag, as companies in the same industry perform well while others report a weak quarter.

For example, Morgan Stanley (MS) had a strong quarter while American Express (AXP) struggled. Morgan Stanley performed well because a number of companies sought its assistance with mergers, as well as to help them raise capital.

For American Express, cost-cutting measures and reorganization were the probably culprits for its poor performance, where it had to take significant charges. Even so, revenue also failed to meet expectations, causing investors to punish them after the weak report.

Another financial, Capital One (COF), got hammered after it failed to meet revenue and earnings estimates, falling by almost 8 percent, losing $4.74. The company also significantly lowered its outlook going forward.

Intel continues to flounder as it looks for ways to combat the quick abandonment of desktop and laptop computers for tablets and smartphones. As a result, the net income of the company in the latest quarter plummeted 27 percent.

For General Electric, it reported solid earnings for the quarter, with all of its industrial units boosting profits. That was led by a growing number of orders from developing nations.

Smith & Wesson (SWHC) Shoot Up on Record Earnings

2012-09-06T16:44:00.002-07:00

Shares of Smith & Wesson Holding Corp. (NASDAQ: SWHC) soared after reporting record earnings for the quarter, with the next quarter also expected to be robust as well.

In its fiscal quarter ending July 31, net income climbed to $18.9 million, or 28 cents a share, on sales of $136 million. That was a huge increase over the $2.3 million, or 4 cents a share recorded last year for the same quarter.

This was far beyond analysts' expectations, which was 18 cents a share on sales of $128.7 million.

For the next quarter, which is usually seasonally slow, Smith & Wesson is looking for sales in a range of $130 million to $135 million, and earnings of 19 to 21 cents a share. Analysts are estimating sales of $119 million and earnings of 13 cents a share for the fiscal second quarter.

For the the fiscal year ending in April, 2013, the company projects earnings from 85 to 90 cents a share on revenue of $530 million to $540 million. That would be a gain of almost 33 percent over 2011.

That would also explode past analysts' estimates of 57 a share for the year, which would include special items. Sales are expected to come in at $498.2 million for the year.

According to Smith & Wesson, the reason for the jump in sales was the introduction of the Shield, which is marketed as "slim, concealable power." It is offered in 9mm & .40-caliber versions

While that may be true in general, specifically the reason is because of the corrupt Obama administration, which has flamed the fire of racism where it doesn't exist, causing many people to stock up on firearms in preparation for possible further unrest and danger.

If Obama were to surprisingly win reelection, gun sales would soar, while if Romney wins, you may see a reduction in sales in response to a safer, more competent and honest administration.

As it is, the gun manufacturer has a backlog of just under $400 million, a 164 percent rise over last year in the same period.

Smith & Wesson Holding Corp. closed the session Thursday at $9.00, gaining $0.28, or 3.21 percent. In after hours trading, the shares of the company skyrocketed to $10.72, jumping $1.72. or 19.11 percent.

Boeing (BA) Says China Needs Over 5,000 Planes

2012-09-05T07:37:00.008-07:00

China will need 5,260 new commercial planes over the next two decades, said Boeing (NYSE:BA), which will generate approximately $670 billion during the period.

While nowhere near as lucrative as the Chinese market, India will also be a major player for aircraft, with estimates that they'll need 1,450 new planes by 2031, which are valued at $175 billion.

For China, Boeing said that the majority of the deliveries will be for small and intermediate twin-aisles, which are represented by the Boeing 787 Dreamliner and 777.

As for single-aisle aircraft, Boeing sees overall deliveries reaching about 3,650 by 2031.

According to Randy Tinseth, Boeing Commercial Airplanes vice president of Marketing, over the next 20 years global expansion for Chinese should grow at a healthy 8.9 percent clip.

For all airlines, over the next couple of decades expenditures are expected to come in at about $4 trillion.

The question for makers of planes are how profitable these sales will be because they're battling it out for market share, which in some cases has resulted in slashing prices by as much as 50 percent to win the orders.

With higher fuel costs airlines are looking for streamlined planes to cut back on costs.

CIGNA (CI) (BCOV) (CPN) (FRO) (GIVN) (LPX) (P) (WWE) (ZLC) Upgraded by Analysts

2012-08-30T10:07:00.000-07:00

CIGNA Co. (CI), Brightcove (BCOV), Calpine (CPN), Frontline Ltd. (FRO), Given Imaging Ltd (GIVN), Louisiana-Pacific Co. (LPX), Pandora Media (P), World Wrestling Entertainment Inc (WWE) and Zale Corp (ZLC) were upgraded by analysts.

Raymond James upgraded Brightcove (BCOV) from an "Outperform" rating to a "Strong-Buy" rating. They have a price target of $26.00 on the company.

Credit Suisse (CS) upgraded CIGNA Co. (CI) from an "Neutral" rating to a "Outperform" rating. They have a price target of $56.00 on the company.

Barclays Capital upgraded Calpine (CPN) from an "Equal Weight" rating to a "Overweight" rating. They have a price target of $21.00 on the company.

Wells Fargo & Co. (WFC) upgraded Frontline Ltd. (FRO) from an "Underperform" rating to a "Market Perform" rating.

WBB Securities upgraded Given Imaging Ltd (GIVN) from an "Hold" rating to a "Speculative Buy" rating. They have a price target of $17.50 on the company.

Bank of America (BAC) upgraded Louisiana-Pacific Co. (LPX) from an "Neutral" rating to a "Buy" rating. They have a price target of $16.00 on the company.

Canaccord Genuity upgraded Pandora Media (P) from an "Hold" rating to a "Buy" rating. They have a price target of $16.00 on the company.

Roth Capital upgraded World Wrestling Entertainment Inc (WWE) from an "Neutral" rating to a "Buy" rating. They have a price target of $12.00 on the company.

Northcoast Research upgraded Zale Corp (ZLC) from an "Neutral" rating to a "Buy" rating. They have a price target of $7.00 on the company.

QE3 Pressure Rising on Bernanke

2012-07-12T10:01:00.000-07:00

Even though it's a failed strategy, the pressure is rising on Ben Bernanke to institute another round of quantitative easing to give the appearance something is being, and can be done, to stimulate the economy.

With no hint in the minutes from the latest FOMC meeting the Federal Reserve is close to pulling the trigger on QE3, it does appear pressure is growing for something to be done, as unemployment remains high, as no job growth is really happening, as the few jobs being created doesn't even keep up with those entering the job market for the first time, let alone those in the job market for years continuing to look for jobs without success.

The growing consensus is the Fed won't wait until the job market further deteriorates to institute more easing. It can't afford to look like they waited too long and are now behind the economic curve.

But whether the idea of QE3 is attractive to you or not, it's going to come, and for investors they must prepare accordingly in the areas they're prepared to put their money into.

There is no doubt commodity and commodity-related companies will largely benefit from the next round of stimulus. The U.S. dollar will start to plummet again after the recent outrageous upward climb, based upon nothing else than it being perceived as the only safe place to park one's money during that period of time.

At this time investors will have to wait until it happens, in the meantime building up their strategy as to how the next round of easing will affect the market.

Pep Boys (PBY) (JACK) (KMB) (OME) (SVU) (TFM) Ratings, Price Targets

2012-06-22T11:40:00.001-07:00

Pep Boys (PBY), Jack in the Box Inc. (JACK), Kimberly Clark Corp (KMB), Omega Protein Co. (OME), Supervalu (SVU) and The Fresh Market (TFM) had ratings and price targets on them upgraded by analysts.

Argus upgraded Pep Boys (PBY) from a "Sell" rating to a "Buy" rating. They have a price target of $12.00 on the company.

Bank of America (NYSE: BAC) upgraded Jack in the Box Inc. (JACK) from an "Underperform" rating to a "Buy" rating. They have a price target of $32.00 on the company.

Argus upgraded Kimberly Clark (KMB) from a "Hold" rating to a "Buy" rating. They have a price target of $92.00 on the company.

DA Davidson upgraded Omega Protein Co. (OME) from an "Underperform" rating to a "Buy" rating. They have a price target of $10.00 on the company.

Northcoast Research upgraded Supervalu (SVU) from a "Sell" rating to a "Neutral" rating.

Piper Jaffray upgraded The Fresh Market Inc (TFM) from a "Neutral" rating to a "Overweight" rating.

Ford's (F) Production Challenges

2012-06-01T08:15:00.000-07:00

Ford Motor (NYSE: F) faces production challenges according to CEO Alan Mulally, who says demand for its best-selling models can't be kept up with by the company.

Mulally concludes the firm will be hard pressed to boost growth in the months going forward as a result.

The problem of course is the weak global economy, which makes it extremely difficult to project sales in the near future. Even in the best of economies it's a uncertain art.

That means the company faces uncertainty as to spending to encourage growth, which when demand slows down, would crush them, as it did General Motors (NYSE: GM) in the past.

Many times it's best to lose sales than to attempt to extract every revenue ounce out of the company. That's where Ford is at today.

About all that Ford can do at this time is to boost overtime and adjust its production schedules. Other than that, it's too much of a risk to add factories and go further into debt.

Until there is more clarity, we should see Ford continue at its production pace. That could be last for some time, which could be good for investors, as it removes a lot of volatility from the mix, assuming demand for popular models continue.

Spanish Borrowing Costs Soaring

2012-05-28T08:03:00.002-07:00

With the fourth-largest bank in the country - Bankia SA - teetering on collapse, Spain announced a plant to save the bank via further expanding its debt.

Ignoring the poor practices of banks in the nation, along with spending more than the country can afford, Prime Minister Mariano Rajoy rather chose to point the blame on uncertainty over the euro zone for the rising costs of borrowing.

Rajoy said this in a news conference:

There are major doubts over the euro zone and that makes the risk premium for some countries very high. That's why it would be a very good idea to deliver a clear message there's no going back for the euro.

The costs of borrowing aren't because of the uncertainty surrounding the region, but rather because nations in the euro zone, just like Spain, refuse to stop spending in regard to promises they cannot keep.

As Keynesianism (using debt to fund government programs and growth) is increasingly seen as a failed "economic" method, countries in Europe and other areas of the world, are embedded in a financial circumstance they don't have the will or means to remedy.

Greece is a good test case to see how the populations will respond when austerity is enforced in response to unsustainable budgets. It won't be pretty as things get worse.

According to Reuters, Spain is thinking about funding Bankia using sovereign paper, which would result in the country taking shares in the bank. That would raise the debts in Spain to 79.8 percent of the estimated economic production in 2012.

The Spanish government has already injected $4.5 billion into the company, and parent BFA has requested an additional $23.8 billion on top of that.

Even though the bailout is immanent, the means Spain will take to employ it still hasn't been decided.

Interest rates on Spain's 10-year bonds have jumped to 6.42 percent on the secondary market, moving closer to the 7.0 percent mark which is believed to be unsustainable.

Rajoy continues to insist that's because of the situation in Europe and Greece, and not related to Bankia itself.

To make things worse for Spain, the government announced the areas of the country that are in serious debt face a refinancing bill of 36 billion euros, far above the the formerly estimated 8 billion.

Spain is the one country most analysts and observers believe would bring the euro zone to its knees if it defaulted, probably ending the misguided experiment.

Peter Schiff Says Stimulus Worst Choice for EU

2012-05-25T08:56:00.000-07:00

Peter Schiff recently stated that the worst choice that could be made by the EU would be for them to put more stimulus into play.

After former French President Sarkozy was voted out of office, German Chancellor Angela Merkel lost her most important ally in implementing austerity measures, and so has been under increasing pressure to cave on going the stimulus route rather than cutting back on spending.

Schiff doesn't think Germany will cave in. He said, "Either Greece is going to leave the euro zone, or it's going to have to accept austerity as a price of remaining a member. There's no way that Germany is just going to cave and support the Greek welfare state."

Of course the real issue isn't the largely irrelevant Greece, but the obvious consequences of other nations lining up soon afterwards to demand they be bailed out as well.

Germany will find itself footing the bill for much of that, draining valuable resources that could be used for productive means and redistributing it to governments who refuse to cut spending to sustainable levels. In other words, the German people will get screwed.

Schiff doesn't believe it will happen, but I'm not so sure. Never underestimate the stupidity in regard to failing Keynesianism, which supports the anemic idea that governments can endlessly spend themselves into prosperity.

The failure in Europe and the growing, unsustainable debt levels in the United States show that Keynesianism is dying and a complete failure, and leaders need to accept that as the reality of the future.

Austerity will be forced on nations around the world whether they like it or not, but it won't come without a lot of pain, as the promises made by politicians who are supported by elites pursuing a New World Order, have never been realistic, and the day of reckoning will be soon at hand for those who have refused to take action and continue to kick the can down the road in hopes the default won't happen on their watch.

Peter Schiff is right in saying the worst action by Europe would be to throw more money into the economy via another stimulus, but it would be surprising to me if Merkel holds out and refuses to engage in more money printing, as most leaders and everyday people don't understand the precipice they're all heading for.

If Merkel has any courage, she would resist stimulus and remain firm on austerity as the economic answer for the region. There is no other way.

China's Economic Challenges Continue

2012-05-24T07:56:00.000-07:00

New data from the HSBC Flash Purchasing Managers Index confirms that factory orders in China are slowing, as it dropped from Aprils final reading of 49.3 to May's final reading of 48.7.

This is the seventh month in a row that the index has been under 50, which means the economy continues to contract.

Hopes that China's economy will rebound in the second half appear to be dashed, as the global economic slowdown continues.

HSBC's chief economist Qu Hongbin, said this, "Policymakers have been and will step up easing efforts to stabilize growth. As long as the easing measures filter through, China will secure a soft landing in the coming quarters."

This not only points to a weakening Chinese economy, but other economies around the world as well, as that's where the weakness lies, with orders plunging from overseas customers. That means those businesses don't see strong demand in the near future.

According to Markit Economics Research,, for new export orders, the sub-index fell from 50.2 in April to 47.8 in May, bringing it down to close to March's final reading of 47.7.

Other weak economic indicators in China for April resulted in the Chinese central bank cutting the amount of cash banks must hold in reserve in order to provide more liquidity in the economy.

That hasn't worked so far, as there is more than enough liquidity, but not much demand for capital. That has resulted in few loans.

Unfortunately, the failed Keynesian idea of spending more money by the government in an attempt to boost growth is being considered by Beijing, which is now going to go further into debt by financing infrastructure projects, which of course means an attempt to artificially prop up the economy in hopes the private sector will rebound.

You would think China would look to the fiasco in Europe and the extraordinary debt in the U.S. as examples of what not to do. But they are ignoring all that, apparently thinking they won't face similar issues by participating in the same practices. They're wrong!

This is also the outlook of new socialist French President Francois Hollande, who wants to stimulate the French economy as well, by focusing on "growth" rather than fiscal discipline.

To think of this a novel idea is of course ridiculous. Some even call it 'game-changing.' What's changing the game about governments spending themselves into failure. What doesn't Hollande understand about the sovereign debt crisis in the region?

He's a socialist of course, so he's even more blinded by the idea of government as savior than most. Yet encouraging more spending will lead Europe quickly closer to the economic precipice than they are now.

Most of Hollandes idea is centered around eurobonds, which is pooled European debt. What it would do is destroy the free markets once and for all, as the market wouldn't be allowed to punish poorly run countries, but rather the cost of money would be the same no matter what the credit rating or outlook of the country is.

In other words, it would take even more incentive away for countries to to get their financial houses in order, and they would attempt to spend themselves out of the dilemna. This is another spin on failing Keynesianism, and will itself fail over time.

Out of control spending and political promises in Italy and Spain has resulted in the countries having to pay close to five times as much interest as Germany does when issuing national bonds.

To socialists like Hollande this is an outrage. He doesn't like the idea of markets forcing discipline on governments, and wants to eliminate that altogether.

It will be a disaster if it is ultimately agreed to, as the last bit of restaint would be taken off of the irresponsible governments in the region, and they would be able to be able to just about spend with impunity, as the cost of failed policies couldn't be interfered with by the market through higher interest rates.

That means the countries in Europe would all be viewed the same in regard to eurobonds, even though they would widely differ in financial health.

Chancellor Angela Merkel rightly opposes this, and would be irresponsible to the German people if she were to agree to it. Her concerns are rightly that the German people would have to underwrite the weaker and vastly irresponsible nations of the eurozone in perpetuity. She is right.

If she does agree to it, it will show that the obsessive idea of keeping the eurozone and European Union in tact is more important than the people of the nations represented; especially those that have their financial houses in relatively healthy order.

Going back to China, it needs to learn from this fiasco if they're going to avoid the same fate in the future.

Facebook (FB) IPO Facing Numerous Lawsuits

2012-05-23T08:24:00.000-07:00

There was no question lawsuits would start flying as the disastrous story of the IPO of Facebook (NASDAQ: FB) unfolded, with three lawsuits already filed in regard to the company going public, with one of them being against Nasdaq OMX Group, which delayed the IPO because of technical issues, and also had difficulty sending executions confirmations to let traders know they had been successfully completed.

Another lawsuit was filed against Facebook, Facebook officers, and the underwriters of the IPO.

From the complaint:

The true facts at the time of the IPO were that Facebook was then experiencing a severe and pronounced reduction in revenue growth due to an increase of users of its Facebook app or website through mobile devices rather than a traditional PC such that the Company told the Underwriter Defendants to materially lower their revenue forecasts for 2012. And, defendants failed to disclose that during the roadshow conducted in connection with the IPO, certain of the Underwriter Defendants reduced their second quarter and full year 2012 performance estimates for Facebook, which revisions were material information which was not shared with all Facebook investors, but rather, was selectively disclosed by defendants to certain preferred investors and omitted from the Registration Statement and/or Prospectus.

Among the defendants named in the lawsuit include Facebook executives Mark Zuckerberg, CFO David Ebersman and Chief Accounting Officer David Spillane; board members of the company Marc Andreessen, Peter Thiel, Erskine Bowles, Donald Graham, Jim Breyer and Reed Hastings; and underwriters Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), JPMorgan Chase (NYSE:JPM), Merrill Lynch (BAC) and Barclays Capital.

It centers around the lowering of revenue forecasts by Morgan Stanley consumer Internet analyst, Scott Devitt, which was unusual because it was done at a late hour of the offering, while in the midst of Facebook's roadshow leading up to the IPO.

Questions on whether retail customers received the news in a timely manner is a major question generated by the suit.

Facebook was trading at $31.83, gaining $0.83, or 2.68 percent, as of 11:21 AM EDT.

Hopes for Pfizer's (PFE) Vyndaqel Dashed by FDA

2012-05-22T10:11:00.002-07:00

If the report from the Food and Drug Administration is used as an indicator, Pfizer's (NYSE: PFE) new drug Vyndaqel has a big uphill battle to climb if it hopes to win approval in the United States.

Vyndaqel, which is a drug developed to treat transthyretin familial amyloid polyneuropathy, which is a neurodegenerative disease.

FDA reviewer Devanand Jillapalli said this in a report prepared to be reviewed by the advisory panel, “I recommend a complete response action, based on inadequate evidence of effectiveness.” What that means is it is recommended the drug be rejected.

Pfizer has already been approved in Europe for the drug, but in the U.S. it is believed they haven't performed a strong enough study to substantiate claims the drug works as the company asserts.

In a document prepared for the review panel on Thursday, Pfizer admits the product was developed on a fast-forward basis, although that quick process is in fact allowed and supported by the FDA.

At this stage of the process these are only recommendations, and once the panel reviews and listens to arguments from a variety of sources of input, they will make their recommendations to the FDA, which at that time make the decision to accept or reject the treatment in the U.S.

The disease has no approved treatment in the United States at this time.

Pfizer has been under growing pressure to produce new lines of drugs that are protected by patents as former blockbuster drugs like Lipitor are now competing with generic drug makers.

Yahoo (YHOO) Pops on Alibaba Sale

2012-05-21T08:07:00.000-07:00

Sales of Yahoo (NASDAQ: YHOO) were popping in early Monday trading as confirmation of the speculation the company was going to sell some of its holdings in Alibaba has investors liking what they heard.

Yahoo owns approximately 40 percent of Alibaba, and said it will sell about 50 percent of its stake, which would raise about $7.1 billion for the tech giant.

Per terms of the deal, it'll be for preferred stock in Alibaba as well as cash.

The company stated it will give back most of the cash to its shareholders.

Industry watchers see this as probably clearing the way for a probable initial public offering by the Chinese tech firm.

When Alibaba goes public, other terms of the sell are it will have to allow Yahoo to sell it shares in the company at that time, or Alibaba will have to acquire 254 percent of Yahoo's remaining shares it holds in the company.

Yahoo was trading at $15.53, gaining $0.11, or 0.71 percent, as of 11:03 AM EDT. It has soared as high as $16.00 on the day.

Facebook (FB) IPO Fails to Meet Hype

2012-05-18T14:22:00.001-07:00

However it may be spun, the IPO of Facebook (NASDAQ: FB) was a disaster by any measure, as the much-hyped bringing of the company public resulted in a deafening yawn, as the social networking company ended its first day of trading a mere 38 cents over its initial offering price of $38.00, with almost 600 million shares exchanging hands.

Now that the company is under scrutiny as never before as to its business model, many are concerned over how it's going to make money going forward, as a significant number of advertisers and marketers don't consider it a good place to spend money.

I've heard that from a number of online marketers over the years who did a lot of experimenting on Facebook with very little return for their money.

The question is how long with advertisers go along with the hype with so little impact from their campaigns.

Having a huge number of people interact on Facebook is one thing, but very few want to interact with ads, or even take notice of them. That's the major problem Mark Zuckerberg, Facebook, and his team face ahead.

That's not to say the share price of the company won't grow, as it simply has too much publicity not to have people in states of euphoria dump their dollars on the company shares, not even knowing the risks associated with its dubious business model, which the company itself admits is under pressure because of privacy concerns around the world.

To make matters worse on its opening date, reports say that underwriters JPMorgan (NYSE: JPM) and Morgan Stanley (NYSE: MS) acquired shares in the company to keep it from dropping under its offering price. That doesn't bode well for the company.

Once the realization the business model of Facebook is flawed, who knows what the company will morph into via acquisitions and new focus, as pressure will inevitably mount for the company to grow revenue and earning in a way it hasn't proven it can do over time.

Maybe we'll eventually see a Facebook smart phone and tablet in the future. Growth will have to come from somewhere.

Wal-Mart (WMT) Reports Great First Quarter

2012-05-17T11:01:00.002-07:00

Wal-Mart (NYSE: WMT) hit all cylinders in the first quarter, with U.S. and international sales both doing well, as did Sam's Club.

Even though the currency market was a negative for the company for the quarter, it was still able to generate 8.6 percent consolidated net sales growth year-over-year.

Same-store sales in the United States climbed a healthy 2.6 percent over the same quarter in 2011, while Sam's Club sales, not including fuel, jumped 5.3 percent.

Wal-Mart International sales soared by 15 percent as the company continues its aggressive expansion. Operating income at the unit rose 21 percent over last year during the same period.

Diluted earnings per share beat previous guidance, coming in at $1.09, up from the $0.98 a share last year in the same quarter, an increase of over 11 percent. Analysts had been looking for $1.04 a share for in the quarter.

Guidance from Wal-Mart for the second quarter in 2013 is projected to come in at a range of $1.13 to $1.18 a share.

Wal-Mart also announced it is boosting its dividend to an annual $1.59 a share, upping it by 9 percent.

The giant retailer was trading at $62.23, up $3.04, or 5.14 percent, as of 1:45 PM EDT.

Central Banks Buying Gold

2012-05-17T09:42:00.000-07:00

With the exception of China, most gold consumption and investment in gold dropped in the first quarter.

Balancing that off a little was the continual acquisition of gold by a number of central banks.

Countries boosting their official gold reserves in the first quarter included Tajikstan, Kazakhstan, Russia, Mexico, the Philippines, Belarus and Ukraine.

Even though central bank demand for gold remains relatively robust, it did drop significantly from the first quarter of 2011, falling 41 percent. But the first quarter of 2011 was an unusual one for gold demand, so the drop in demand was expected. In the first quarter of 2012 central banks acquired 80.8 tons of gold.

For the year, according to the WGC, investment gold demand climbed by 13 percent to 389.3 tons. Gold coins and bar demand fell 17 percent year-over-year.

With economic conditions continue to be the same in 2012 as they were in 2011, the WGC says it expects central banks to continue buying on a net basis.

They base that probability the increasing strategy of countries diversifying their foreign reserves, while others attempt to keep their current ratio of gold to foreign reserves in tact, requiring them to buy more gold.

JPMorgan (JPM) Sued by Investors Over Trading Loss

2012-05-16T10:14:00.001-07:00

It didn't take long for the expected lawsuits against JPMorgan (NYSE:JPM) to emerge in response to the trading loss of $2 billion last quarter, as two lawsuits have already been filed against the giant bank, with more probably to come.

One of the lawsuits accuses the company of securities fraud, based upon “materially false and misleading statements and omissions” allegedly made by CEO Jamie Dimon on the April 13 earnings call.

The complaint states this:

“Defendants misrepresented the losses and risk of loss to the company arising from massive bets on derivative contracts related to credit indexes reflecting interest rates on corporate bonds. These derivative bets went horribly wrong, resulting in billions of dollars in lost capital for the company and billions more in lost market capitalization for JPMorgan shareholders.”

In the other lawsuit top executives Dimon and CFO Douglas Braunstein, along with the board members of the bank being accused of being in breach of fiduciary duty, wasting corporate assets and receiving unjust enrichment.

This appears to be an attempt to take advantage of what appears to be an investing mistake which cost the bank money in order to gain back some of the losses.

An error made in investments isn't a legal matter, in spite of the hype of the Federal Reserve, SEC and FBI investigating the bank.