The US isn't strong enough not to care about them now. But one day it will be, Jim Cramer says.
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Until all the implications of the new law are fully understood, bank stocks will be sluggish -- but worth holding on to.
By Jim Cramer, TheStreet
Should there have been more of a bounce after the financial regulatory reform legislation went through? Why was everything so muted? One answer could be that people didn't care for Bank of America's (BAC) earnings.
I get that. There was no growth, and management really hammered shareholders with the most bearish possible assessment of the costs of regulation. They basically presented the negatives of all the costs and lost revenue without any potential growth that could come from higher service fees that we all know are on the way. It was a horribly downbeat conference call.
But there was something else at work, too, and it must be pointed out. Financial regulatory reform may be done, but it is rapidly dawning on people that we know nothing about what it will mean when it is implemented.
These companies show proof of growth in an uncertain market.
By Robert Hsu, Editor of China Strategy
With widespread investor concerns over the current state of China stocks, there are a lot of fear and frustration over China investments right now. The issue is that all China stocks are not the same. There are different types of China stocks listed in the U.S. -- state-owned enterprises, mid-cap blue chips and small caps, each with specific characteristics.
Overall, I still believe that we will see 40% upside in many of these stocks by year's end, most of it in fourth quarter, and now is the time to position for the upcoming rally.
To help you navigate toward some promising China investments, here are 3 stocks that show potential for growth this earnings season.
The downward roller coaster ride continued
Value Line Index-- Contains 1700 stocks so I think it is a better representation of the market than the S&P 500 or the even narrower Dow 30 -- down 4 days out of 5
- Although we are up by 5.75% since the beginning of the month we are down 6.54% for the last month
- 80% Barchart technical sell signal
- Closed Friday below its 20, 50 and 100 day moving average
- Barchart Trend Spotter (tm) sell signal
Barchart Market Momentum -- Contains approxi
While individual investors remain skittish, several top strategists, including Warren Buffett, are sounding optimistic.
As Friday's market tumble demonstrated, there's still plenty of fear to go around in the current market. Yes, sentiment had improved markedly earlier in the week as the market continued to bounce off its early-July lows, but all it took were a couple iffy earnings reports and some bad consumer sentiment data to send investors heading for the hills.
With fears of a double-dip recession or another bear market running high, it's not surprising that many of the stock market gurus I keep an eye on are finding opportunity. As Warren Buffett has said, the time to be greedy is when others are fearful.
One top mind finding bargains amid the fear: Bruce Berkowitz, who was recently named Morningstar's domestic equity fund manager of the decade.
Investors are worried about falling revenue streams and loan demand at Citigroup and other banks.
The bank reported falling revenue -- just 6% -- in its investment banking business. That seemed to confirm concerns that the Wall Street side -- investment banking, trading and the like -- of the big banks is slowing.
The company admits its mistakes and offers free iPhone 4 cases. A little humility never hurt anyone.
But when Apple's arrogance begins to inconvenience customers, maybe it's time to take things down a notch. When chief executive Steve Jobs addresses iPhone 4 antenna problems by saying "just avoid holding it in that way," well, something has to change.
And so it was refreshing Friday to hear Jobs (pictured) say things like "we're not perfect," "we're human" and "we make mistakes." Apple is giving free cases to iPhone 4 users to improve the phone's reception.
Concerns over financial-sector earnings might be overblown.
Megabanks JPMorgan (JPM), Citigroup (C) and Bank of America (BAC) have all reported better-than-expected earnings results this week -- only to be knocked to the ground by unimpressed investors. The problem is that the earnings beats are being driven by reduction in loan-loss provisions, which are like accounting piggy banks that are used to protect against defaults.
An optimist would say that these reductions are a result of a strengthening economy and improvements in the number of people who can pay their loans on time.
But the skeptics are having none of it. Bank stocks have tumbled over the past two days on concerns that bank executives are using creative tactics to dress up their earnings -- prematurely tapping into their credit reserves. So who's right?
Google's disappointing quarter and the Goldman Sachs settlement don't offer any clear guidance, except to stay on the sidelines.
By Jim Cramer, TheStreet
Last night confirmed what we've been wondering since last quarter: Google is not a monopoly. It is in competition with Facebook and Apple (AAPL), two formidable adversaries. Facebook can spend whatever it wants, as it is private and doesn't have to report to shareholders, and Apple can do whatever it wants and seems to do it right.
And to compete, Google, one of the most cash-rich companies on the globe, is raising capital! That's not what we want to hear from a company that missed estimates and is experiencing maturity at a lightning pace. Plus, it has ceded to China! You can never cede to China if you are a growth company. Only local, community banks don't dream of entering that market. I can't think of any other business that doesn't want to operate there or find a way to do so unfettered.
JPM beats expectations but only after releasing its loan-loss reserves.
So far, so good for bank stocks.
Thursday, JPMorgan Chase (JPM) reported second-quarter earnings of $1.09 a share. Not only was that a 289% increase from the second quarter of 2009, but it beat Wall Street projections for a 159% jump in earnings and earnings of 73 cents a share.
Some people, including me, had worried that Wall Street’s expectations for bank earnings had gotten way ahead of themselves and that banks would be unlikely to meet those projections. (For more on that worry, see my July 7 post, Watch for a buying opportunity on my watch-list banks if earnings disappoint this quarter.)
You can take that worry off your list.
The company will pay $550 million to sweep serious SEC charges under the rug.
Who came out the winner after Goldman Sachs (GS) settled charges with the Securities and Exchange Commission?
Let's see. In after-hours trading, Goldman shares jumped by 8%, and that was on top of a 4% increase Thursday as rumors of a settlement raced around the markets.
Investors continued to applaud Friday. Shares were up $3 and change, which means the company is worth $1.5 billion more than it was before the settlement. Not bad for a $550 million investment; no wonder they say Goldman always wins.
The economic downturn has many older folks returning to work, while youngsters are simply giving up.
More people over age 65 either have jobs or are looking than ever before, The New York Times reports. But the participation of teens in the job force is down, perhaps because in this economy, more young people are either unemployed or have given up searching for work.
The flip took place around the end of 2008, according to the Bureau of Labor Statistics.
The famous annual festival in Spain has been hit by the country's economic crisis.
The annual festival celebrating the running of the bulls has been tempered this year, The Wall Street Journal reports. Spain is suffering an economic downturn that threatens to turn into a crippling recession, and people aren't so bullish on the bulls anymore.
Normally, nearby businesses pull in about half their annual sales during the Fiesta de San Fermines in Pamplona. But this year, business has slumped. Tourists are staying away, and the ones that did show tried to keep it on the cheap by buying alcohol in local supermarkets, writes Joe Parkinson.
Foreign banks got out of the business of these securities, but they're jumping back in now.
Foreign banks in particular pulled out of the business altogether after getting badly burned. But now, they're jumping back in because they have to stay competitive with American rivals, the Financial Times reports.
European and Japanese banks are aggressively hiring Wall Street traders, and setting them up in New York to concentrate on the American market. And so the cycle begins again.
Despite a slowdown in the US and Europe, luxury brands are in demand by Asia's fast-growing upper and middle classes.
By Jake Lynch, TheStreet
Luxury retailers may seem like the worst investments, given the prevalence of tightwad consumers, but the opposite is true for some companies.
Last week's "Best in Class" feature made the bullish case for jewelry seller Tiffany & Co. (TIF). The same for leather-ware seller Coach (COH) follows. The investment theses are comparable: Emerging-market demand, specifically in Asia, will offset developed-nation stagnancy this year.
Although America's economic dominance is weakening, its cultural hegemony is squarely intact. American luxury brands have cache in emerging markets, confirmed by Coach's latest commentary.
History shows that now could be a good time for optimism.
I've dived into history and the economy a lot lately in my recent columns and blog posts (with examinations of last week's big 3%+ up day as well as a look at the growth rate of the leading economic index or LEI). The takeaway: History suggests now is the time to be optimistic. In particular, there are some striking resemblances between the current situation and the 1962 summer stock market rebound.
Then, like now, the stock market dipped below its 50-day and 200-day moving averages and then posted a big 3%+ up move. Also, the LEI's 12-month growth rate remained in positive territory -- brushing off concern of a double-dip recession (the economy was recovering from the 1960-61 recession). Stocks went on to gain more than 32% over the next 12 months.
I'm not the only one looking at 1962 for clues to what lies ahead.
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Shares of DVR pioneer TiVo are up 40% over the past 2 years, but unlike with the industry giants, there's still plenty of room to run with this pay-TV play.
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[BRIEFING.COM] S&P futures vs fair value: +2.70. Nasdaq futures vs fair value: +8.50. Equity indices are on track to begin the Tuesday session on a modestly higher note as futures on the S&P 500 trade almost three points above fair value. Futures spent the bulk of the overnight session just below their flat lines, but returned into positive territory during the past 30 minutes. There was no news coinciding with the move, but it is worth mentioning that Germany's DAX (+0.5%) climbed ... More
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