MorningWord 12/24/12: First and foremost, all of us at RiskReversal want to wish you and your families a very Happy Holidays. Enis, CC, Kristen and I will all be traveling to see family over the next week and a half and our posts may be a bit sporadic, but when we are in front of our computer screens we will be sure to post any thoughts or ideas.
MorningWord 12/21/12: Last night saw a bit more action than most would have expected for the second to last Thursday of 2012. Earnings from the likes of NKE and RIMM have those stocks moving, and as Enis referred to in his MacroWrap, the S&P futures saw their most active overnight session of the year.
MorningWord 12/20/12: The 3 month chart below of AAPL and RIMM’s price performance shows the stark difference in investor sentiment for the 2 smartphone makers of late. AAPL has re-traced more than half of its 2012 performance (was up nearly 75% on the year back in Sept, now up ~30% ytd), while RIMM after being down more than 50% on the year at one point in Sept has since risen over 120% and now is down about 5%.
Aside from the recent price action there isn’t a whole lot of other ways to compare these 2 companies or their stocks that would be nearly as favorable for RIMM.
RIMM is set to report their fiscal Q3 results tonight after the close. The options market is implying about a 12% move post earnings which is slightly rich to it’s trailing 4 qtr avg move of about 11% and essentially inline with the 8 qtr avg.
MorningWord 12/19/12: Enis and I had a very interesting dinner last night with a former emerging market strategist for a large bank and a global macro hedge fund manager, where we debated the prospects for the global economy in 2013, and thus where we saw investment opportunities. The conclusions were “clear as mud”, and not cause of the wine, but largely because the global economic outlook is largely predicated on continued central stimulus the world over at a time when some of the mightiest nations face austere times in a demand environment that seems tepid at best.
MorningWord 12/18/12: All seems clear on the western front, so to speak. Mr. Boehner appears to be spending more and more time with his friend Mr. Obama, maybe they are both feeling a bit sanguine with the Holiday’s upon us, or maybe the smoke signals coming out of said meetings are actually signalling some progress on bi-partisan “cliff” deal. Your guess is a good as mine as to the when, but make no mistake, it appears that both parties get the optics of appearing to be working hard for their constituents, and we will likely have some framework of a deal in the coming weeks.
However, we don’t think that’s any reason to get the egg nog out and give the all clear signal. As Enis pointed out in his Macro Wrap yesterday, the buy-the-rumor, sell-the-news possibility of price action after a deal is reached has prior precedent. With the market only 3% from 5 year highs, it is imprudent to get too excited about a well-telegraphed resolution.
As we have suggested on many occasions on the site over the last few weeks, equity and vol markets have not seemed to be too bothered by the prospect that we wouldn’t get a deal, regardless though we used the opportunity to position for one more 2-3% sell off prior to year end, which seems be increasingly unlikely as we get nearer to Christmas. Including today (and a half day on Christmas Eve) there are 7 and half trading days left in the year, and I think it is fairly safe to say that the range is in, likely up or down 2.5% from current levels, with the strong bias to flattish as portfolio managers do their best to mark their books in what is sure to be a low volume “holiday” trading environment.
But the look of calm could be in for a rude awakening when a page is turned on the new year if earnings and sales revisions continue their negative trend. That’s still how stocks are valued at the end of the day.
MorningWord 12/17/12: U.S. equity markets on Friday were once again dominated by AAPL’s plunge from its all time high made in Sept, with the stock making a new 10 month closing low. Even though AAPL confounded alot of investors and pundits during its 2012 parabolic move from $400 to $700 in the first nine months of 2012, the move from $700 back down is probably going feel a lot worse. In the last week we have seen a handful of analysts lower their 12 month price targets (some below $600), lower their 2013 earnings estimates (as a result of rumored iPhone5 order cutbacks in Asia) and now just this morning a DOWNGRADE from a bulge-bracket bank (Citi downgrades to Hold and $575 target).