Archive for the ‘Technology and Business’ Category

This is not a Reuters headline you want to wake up to… being put on a Chinese “unreliable entity list.”

Looks like we’re heading for a showdown between everyone’s favorite American president and everyone’s favorite Chinese Communist Party.

And, unfortunately, Apple (AAPL) may be caught in the middle.

Ouch.

Many years ago, someone termed the new leadership in NASDAQ “FANG”… Facebook, Amazon, Netflix, and Google.  Essentially the best of the new tech.

Over the last few years, that morphed into “FAAMG”… Apple and Microsoft got let into the group.  While elder statesmen, there is no doubt that they deserve to be part of tech’s elite.

So powerful is this group that just those five stocks represent 20% of NASDAQ movements.  That is incredible, if not incredibly unbalanced.

And it’s the performance of these five companies that have kept the NASDAQ index from falling like other popular indexes around the world.

For four out of the five companies, the performance has been merited.

We all have to stay at home and have things delivered to us?  Geez, could it get any better for Amazon (AMZN)?

We all have to stay at home and use the cloud to do pretty much everything in our lives… like work… school… socializing… entertainment?  That’s great news for cloud-based leaders like Facebook (FB), Microsoft (MSFT), and Google (GOOG).

So why am I separating Apple (AAPL) from the herd?  After all, our mobile device is absolutely indispensable, right?

Yes, but will people without jobswithout income… scared and uncertain when the crisis will be over… line up for new iPhones come this fall?

I don’t think so.

That is, if there’s even an Apple Store open to line up in front of.

But it’s not just me.  The other day I shared a KeyBanc’s report that iPhone sales in April have declined -77%.

-77%!

No other FAAMG’s business is taking a hit like this… to the contrary, all the other FAAMG’s businesses are being helped by the crisis.

It’s not Apple’s fault that the entire world just stopped.  But it is investors’ fault if they invest in Apple right now.  Because — right now — Apple is getting gutted.

So why is AAPL enjoying the same stock success as these others?  To borrow a phrase from a past crisis:  Irrational exuberance.  

Ultimately reality wins.

Apparently China has punitively banned 35% of beef imports from Australia… because the Australians haven’t backed down on their questions to China about the origins of Covid-19.

And this just days after China floated plans to do an 80% tariff on Australian barley… which apparently completely derailed the trade.

China must be so proud of its Communist Party.

This is the kind of thing that could — should — blow up in their faces.

All I can say is:  GO AUSSIES!

Another harsh Apple headline:

iPhone Sales Crash 77% In April, Hammered By COVID-19 Lockdowns

This is from a KeyBanc Capital Markets report, using internal credit card data, as reported by ZeroHedge.

Here’s the mind-boggling chart.  Notice there is no “black bar” for April 2020 store revenues.  Uh, oh.

Apple iPhone Sales Chart

Another uh, oh:  That light gray bar for April 2020 is the same size as March 2020 — meaning no growth in online sales month-to-month — and is noticeably smaller than April 2019 online sales.

So, so much for Apple’s online sales picking up the slack for their closed retail outlets.

There’s data, in no black or white!

So how in the world could Apple continue sprinting towards an already inflated all-time high?

That’s the real mind-boggling question.

Well, that’s not a good headline.  More evidence that, in the short term, AAPL may have too much of a premium built in.

Here’s the link to ZeroHedge’s take on the new IDC global smartphone report.

Warren Buffett almost single-handedly put a stop to the last financial crisis in 2008.  He penned a now legendary “Buy American.  I am.” op-ed in The New York Times.  That was incredibly significant.  It gave investors the confidence needed to get back on the horse.  If getting back in the market is good enough for Warren, it’s good enough for me!

Yesterday he may have done just the opposite.

At the Berkshire Hathaway annual meeting, Buffett informed, well, the world that he completely liquidated his significant airline holdings.

Too much uncertainty.

Translation:  I’m selling because I think things will go down.

As significant as selling, he’s not buying, either:

“We have not done anything, because we don’t see anything that attractive to do.

Translation:  Yeah, I definitely think things will be cheaper in the future.

So I’m wondering what we’ll wake up to in the weeks ahead?  If Warren’s getting out, should I?!

Everyone loves to talk about how much cash AAPL has…

… I wonder how many people realize how much debt Apple has to offset that cash?

Almost $120 billion worth.  Like 60% of their cash horde, which makes that cash pile quite a bit smaller than most think.

Commenting on Apple’s financials is like complaining after someone just bowled a 300.  They really are perfect.

So, now that I’ve made that disclaimer, I’m going to comment on Apple’s financials.  :)

Well, not so much their financials… as much as their valuation as determined by their financials.  Because I think they suggests Apple has overheated.

A long time ago, the rule was your P/E should be about your growth rate.  Primarily earnings, but people applied this to revenue growth, too, given that earnings was sometimes impacted by operating initiatives.

So, if you were growing earnings around 10% a year… or revenues around 10% a year… you should have about a 10 P/E.

Like everything these days, that’s also been inflated.  Or ignored.  Or convoluted due to a variety of “financial engineering” things.  People rationalize inflating via the term, “multiple expansion.”  But regardless of creative justification, it’s still a grounding rule-of-thumb that offers some perspective.

How does all this apply to Apple?

AAPL’s P/E is just over 23.

Over the last few years, AAPL’s average earnings growth was about 14.5%.  AAPL’s average revenue growth was about 7%.

See the problem?

On either measure, AAPL is overvalued by a good chunk.  Sticking with just earnings (the higher percentage), that suggests AAPL should be trading around $200 per share.

But it gets worse.

Pre-pandemic, Apple’s Q1 earnings were up 19% comparing like quarters.  (Revs were up 9%.)  Still below P/E, but at least you can see that earnings growth was within spitting distance of it.

Post-pandemic, Apple’s Q2 earnings were up 4%.  (Revs essentially flat.)  Now that’s way below P/E.

But here’s the bottomline:  The combined earnings growth of 14% for the first half of the fiscal year doesn’t account for the fact the next few quarters are going to look more like Q2 than Q1.  Due to the pandemic, earnings and revenue growth at Apple HAVE SLOWED.  For real.

And my point?  The shares are priced like nothing’s happened… for an immediate snapback… but the numbers are already saying this isn’t happening.

Heck, even the company said this isn’t happening on their conference call.

Using my old P/E guideline, AAPL could theoretically be valued around $100 per share.

Now, before anyone thinks I’m a stock-hating crazy or something, I don’t believe that will happen.  Apple is one of the most phenomenal businesses on the planet.  They are so big — and so well managed — and have so many levers — that of course they would make adjustments to their business before that happened.

For example, they could cut a lot of costs.  Duh.

Or, if their hardware business ever sucks too much wind, they could just spin-out their services businesses, which continues to grow impressively through this crisis.

You might say that they would never break up their eco-system… but, believe me, it’s a lot more common in business than you might think.  Usually goes under the term “monopoly.”

You might also say that Apple is just too big to have such a puny valuation.  But there are lots of HUGE companies with puny valuations.  For example, massive distributors with tiny earnings.

So, while I’m not saying AAPL is going to $100, the thought that it theoretically could gives me comfort saying AAPL — in the short term — should be trading closer to $200 than $300.

Apple reporting earnings yesterday.

They beat significantly lowered expectations on top & bottom line.

How excited were analysts?  Not very.  Only a few upgraded price targets (a bearish sign), and then only by small amounts (also a bearish sign).

AAPL tried to rally… but couldn’t make it over $300… and fell back for a loss on the day.

There’s a reason why 80% of analysts CUT price targets going into earnings… because the virus has really bashed Apple. 

Here is the perspective:

Apple’s guidance for this quarter was a revenue range of $63b to $67b.

From Apple’s conference call yesterday, Tim Cook said:

Based on Apple’s performance during the first five weeks of the quarter, we were confident we were headed toward a record second quarter. At the very high end of our expectations.

That means they were on track for $67b.  But actually it probably means they were on track for $68b to $70b… since Apple is notorious for sandbagging guidance.

But, with the virus, they only logged $58b in revenues.  (Still a huge number, btw.)

Assuming even revenue distribution through the quarter, the $67b would have been about $22.3b per month… so theoretically the $58b was $22.3b + $22.3b + $13.4b, since the bulk of the virus problems hit in March.

So… if we take $13.4b as what they did in March… and assume an “uptick” for April (as Cook called it in the earnings call)… and assume things don’t really open up in U.S. or Europe until June… and assume a “normal” June… we could guess revenues might be $14b + $14b + $22.3b or about $50b…

… that’s if everything opens up in June and things go back to the “happy go lucky!” good times of Janurary.

Hello?  Are any of the Apple fanboys bidding up AAPL listening?  That’s still a big-ass revenue contraction… like 30% below a ballpark of what their pre-virus performance might have been… when the stock was hitting an all-time high of $327.85.

So why is AAPL currently trading just 10% below that now?

Because the reality of the next 1-2 quarters hasn’t sunk in for Apple investors yet.

Seems to me my simple, back-of-the-envelope hack calculations suggest AAPL should be down another 20%… or <$240.

And that’s not even including what happens if we see a second wave of infections… or if the market, which shot up in April, naturally cycles down 5-10% in May.

My 2 cents.

Going against the crowd sucks.

You always feel like you may be wrong.

That really does take its toll emotionally.

It’s torture to watch something go up when it should be going down.

Or down when it should be going up.

It only feels better near the end, when the action turns.

If the action turns.

See what I mean?  Torture.

I’m a contrarian. It’s my observation that when everyone thinks one thing, the real, outsized opportunity is the other.

But what happens when everyone thinks one thing… but the market is thinking quite another?

Take AAPL. From a low of around $212 a month ago, it’s powered its way to almost $290. More impressively, just about 12% from its all-time high.

Heck, if you went way out on a limb, you could probably say that’s even within a normal trading range.  “Has the whole world stopped?  We didn’t notice!”

But all through this romp upwards, most Apple analysts have been decidedly negative.

Out of about 30 analyst moves in the last two months, a whopping 80% of them were downgrades.

To put this in context, Intel analysts were split 50/50 between upgrades and downgrades going into their earnings last Thursday.  So, relatively speaking, 80/20 to the negative side is a big spread.

 

 

As important, some of the AAPL downgrades were double downgrades… that is, a second price-target cut within just a few weeks.

So what’s the contrarian play here? Go against analysts and buy?  Or go against the market and short?

I think you go against the market. That’s the bigger “everyone” in this case.

Going against the market also seems, well, more rational to me.  I love Apple but I think the current market enthusiasm seems excessive given our uncertain environment:  Uncertain when lock-downs will end… uncertain that people will want to congregate at Apple Stores when they do… uncertain when we’ll see a vaccine… uncertain that a 2nd, or even 3rd, inflection wave may hit… and so on.

This uncertain environment is awesome for a select number of businesses… say Amazon and Netflix… but could be less kind to a (mostly) consumer hardware company like Apple.  Not that I’m not saying people can live without their iPhones — they can’t — but I am saying they may be less quick to buy $1,000 upgrades.

No doubt, what makes going against Apple scary is it’s one of a handful of companies that has the business levers to manage its way around a crisis like this.  And they are notorious for pulling rabbits-out-of-hats.

Still, a V-shaped recovery?  THE ENTIRE WORLD HAS SHUT DOWN.  Does a (mostly) consumer hardware company merit trading anywhere near an all-time high?  Does the market merit trading anywhere near an all-time high?  Somewhere in this equation there has to be some p-a-i-n.

I’m not the first person to say there’s a good chance we’ll see another downdraft.  So if Apple does surprise to the upside, AAPL could still take a tumble along with the rest of the market.  Nice to have a backup scenario in this situation.

P.S. A couple of other quick AAPL trading comments:

  • While Apple has done a terrific job moving into services, these are still only about 20% of company’s revenues. Meaning, Apple is still mostly a hardware company.
  • Intel, also a hardware company, has had a similar run-up as AAPL. Last Thursday INTC blew away their numbers, benefitting from the Coronavirus “work at home” situation. Apparently, with mobile being such a huge focus the last few years, home desktop machines have been ignored and needed updating.
  • In contrast, you don’t need to upgrade your iPhone to work at home.
  • One last data point: Even though Intel blew out numbers, INTC finished flat for the day.

There should be no doubt that greed makes people do funny things.

Take investing in oil.

Sure, there’s a lot of companies that truly want to buy oil.  To create gas.  Asphalt.  Lubricants, paint thinners, and dry-cleaning solvents.  Charcoal briquettes.  Wax birthday candles and crayons.  Polyester shirts.  Plastic drinking cups, toothbrushes, and hair combs.  And so on.

But there are also a lot of people that simply want to trade in oil… without never, ever taking delivery of oil.

These traders have played a rather interesting game.  They buy oil contracts.  But these contracts actually oblige them to take delivery of oil, because, after all, that’s what they’re buying.

But remember they never, ever really want to take delivery of oil… I mean, where are they going to put it, in their swimming pool?

So the plan is always to sell the contracts before having to take delivery.

That’s the way it’s worked for a long time.

Until this week.

Hoping for a last minute Hail Mary (i.e., something that would spike the price of oil higher), it looks like a group of oil contract holders held on to their contracts a bit too long.

Normally this isn’t a problem.  There’s always a buyer at the right price, right?

Not if there isn’t readily available storage for that purchased oil!

And that’s what happened this week.  There was no readily available storage… which caught a group of traders with their proverbial pants down.  Faced with the prospect of actually having to fill their swimming pools with black oil, these traders literally had to pay companies to take it off their hands.

And, thus, we saw the first NEGATIVE oil prices ever.

It didn’t last long.  And it wasn’t for that many contracts.  But it was a spectacular flame-out… an absolute spectacle to watch.

The lesson?  If you’re an oil trader and there isn’t any oil storage, DON’T WAIT UNTIL THE LAST MINUTE TO GET RID OF YOUR CONTRACTS.

And, except for a few isolated cases, chances are most oil traders won’t come anywhere close to doing that again.

Duh, right?

But, you never know.  :)

Dow is a hair away from 24,000 as I write this.  Nasdaq a shade over 8,500.  We’re back to being closer to the top than the recent bottom.

Today’s action felt like it’s really, truly going to be a V-shaped recovery… that we should be back at our old highs in no time at all.

But… b-e-w-a-r-e.

Because it was just a few weeks ago that it felt like the crashing would really, truly never end.

And that’s what happens during a crisis… the mania swings in both directions.

Don’t get me wrong:  We have a lot going for us in this crash.  Oil is really low… and that’s my #1 requirement for an advancing economy.  Companies headed into this crisis with a lot more going for them, too (i.e., real growth, real revenues, and real profits).  And lots of technology companies are going to absolutely thrive in this crisis, for example, Amazon, Netflix, DoorDash… anything to do with the cloud… and so on.

And, critically, the government has backstopped everything with TRILLIONS in bailout money.  (“Oh, yeah, that.”)

But let’s call a few spades spades here:  THE ENTIRE WORLD JUST STOPPED!  That’s going to affect many, many more companies than will benefit.  Stocks ran up waaay too much before the crash, too, so even without a crash, they needed a 10-20% correction just to whack them back in line.  And — most significantly — no one really knows when we go back to normal.

This last point is the key.

This V-shaped rally — where stocks go straight down, then go straight back up, forming a “V” pattern — is almost entirely predicated on us getting back to normal soon.

As in, investors already know this quarter is going to be a disaster, but they think they might have the next one in the bag.

But what about the next quarter?

If I’m the CEO or CFO responsible for offering public company forward guidance… in this environment… there’s no way I’m touching that with a 10-foot pole.  That’s a guaranteed lawsuit just waiting to happen.

So, unless I’m one of the handful of companies that are crushing it during this crisis, there’s no way I’m going to be even the slightest bit optimistic about the future.  Because everything is uncertain.  How long this will last.  What the 2nd wave looks like.  Or the 3rd.  Or if people really are developing immunity.  And so on.

So I either give the biggest low-ball guidance in history — or what is happening more and more — I simply refuse to offer any forward guidance.

That’s when the next shoe drops.

When analysts and investors see this negativity… then try to understand this negativity… then realize they’re now really, truly flying blind… that’s when the rug gets pulled out from under them…

… and the market, too.

Because that’s not going to feel like “soon.”  That will, for a period, feel just like FUD (Fear, Uncertainty, and Doubt).

It’s inevitable.

Because mania is inevitable.

Oil — really the cost of a unit of energy — affects the cost of EVERYTHING on the planet.

Which means that when oil prices go up, that FINANCIALLY HURTS everyone on the planet…

… including EVERY AMERICAN.

So why is Trump actively trying to drive oil prices higher?  In fact, why do all American presidents feel the need to do this?

I know people will say, “to protect America’s oil producers” … and so that we’re not strategically dependent on foreign oil.

Hogwash.

The way to do this is NOT to artificially raise set prices.  It’s to innovate.

Either we figure out a way to extract oil less expensively…

… or we figure out economically viable energy alternatives…

… say a conversion to natural gas, where we have a 100-year supply… or, electric cars… or solar-driven residential and commercial buildings.

And so on.

Anything but charging Americans MORE, which means we just end up FUNDING THE VERY PEOPLE THAT WANT TO DO US HARM MORE.

Sorry, energy industry.  Innovate or die.  Just like every other industry has had to do.  But don’t drag the rest of the country down with you.

Unless you’re short — and other than the great St. Patrick’s Day holiday where we all get to be green — not many silverlinings these days.

Except one big one:  The planet Earth is happier.

Maybe shutting down everything will give the planet a chance to breathe again?

After all, in terms of our stewardship of Earth, we’ve all acting like kindergarteners…

… so it’s fitting that the solution to climate change might very well be a global time out! 

Everyone is weighing in on Coronavirus prognostications.

I will try to keep mine to just the ones I feel are fairly unique.

My theme?  We couldn’t be better prepared for exactly the crisis we’re going to be going through.

*  This isn’t like the last two great crashes.

The 2001 “Dotcom Crash” was based on massive valuations with zero profits — and in many cases, zero revenues.

The 2008 “Great Recession” crash was based on artificially pumped up real estate prices, not real productivity gains.  (It was also exacerbated by skyrocketing oil prices, due to political, not fundamental, issues… and had twice the unemployment we have now.)

Whatever we’re calling 2020 — The Corona Crash? — we’re starting with real businesses, with real revenue growth, making real profits, involved in real productivity gains, historically low unemployment, and extraordinarily low oil prices.

In other words, we’re already starting with a much stronger hand.

*  Ironically, many of the productivity gains of the last decade involve remote technologies, i.e., letting employees work from home, ordering pretty much anything online, and, as important, socializing from a far.

So, in many ways, the last decade or two has been great practice for this exact situation:  Remote working, remote living, and social distancing.

*  Not only are the remote technologies in place, but the entire millennial generation prefers to socially distance.

Half the time millennials have their heads buried in their phones — even when they’re sitting right next to each other.  So do you really think they care whether they’re in the same room or a different state?  Not at all.

*  While older generations panic about bailouts and handouts and such, the entire millennial generation knows nothing but bailouts and handouts.

So do millennials think we’re in a crisis?  Absolutely not.  Feels pretty normal to them, like it’s just something we go through every once in a while.  What’s the fuss?

*  And finally:  The market needed to be popped.  Markets aren’t supposed to go straight up, like they did almost the entire month of February.

So we’re down 20%?  I can easily make the case we were 30% overvalued.  Because markets aren’t supposed to go straight up.

I’m not saying it’s not going to be rough, but I am saying we seem to be particularly prepared for this crisis.  It’s like a lot of what we need to do is already done.

We’ll see.

I’m fascinated by the events unfolding between China and the NBA.

Yesterday CNBC ran this headline:

China Silver Will Face Retribution

… and then inside the article this quote:

What Does This Even Mean China

Ha!  China really doesn’t get it:  THAT’S WHAT FREEDOM OF SPEECH IS ALL ABOUT!

My respect for the NBA — and Mark Cuban who has also been chiming in — just went through the roof.

I just read an interesting — disturbing — piece on our state budget:

CA’s Budget Doubled In 8 Years To $218 Billion

Both the title of the article… and the title of this post… says it all.  Ugh.

There is a lot I don’t like about our president.

However, his tweet this morning reveals one of the things I love about the guy… that with new data, he can bypass a bunch of time-wasting politics and thrust a critical issue into the limelight in a moment’s notice:

I am certain that, at some time in the future, President Xi and I, together with President Putin of Russia, will start talking about a meaningful halt to what has become a major and uncontrollable Arms Race. The U.S. spent 716 Billion Dollars this year. Crazy!

What’s the new data?  Maybe someone told Trump the deficit projections… driven in large part by almost $6 TRILLION in military spending since 2001?

I’ve long thought we spend a ridiculous, INSANE amount of money on the military.

We can pretty much bury the entire planet knee deep in nukes… do we really need to spend some 20% of budget on more superfluous weaponry?

Spending half as much… even a third as much… would still make us the biggest military spender in the world.

Good for Trump to bring this issue front & center…

… which is sure to confound both his greatest skeptics AND supporters!  :)

The market is getting rocked by giants swings of volatility.  When it goes up, everything is just the b-e-s-t ever!  And when it goes down, everything is just the worst, worst, worst!

It’s hard not to get caught up in the wash.

Two fundamental emotions drive investing and the stock market:  Greed and Fear.

Greed that you want even more… and fear that you’ll lose everything.

We had an interesting debate the other night:  What’s stronger?

For my money:  Greed.

Because the people involved in the stock market are a self-selecting group… they are, by nature, aggressors.  They want better food… better clothes… better cars… better houses.

So the natural bias of the people that make up the market — over the long run — is up.

That thought gives me a bit of comfort as we watch the market chunk lower.

In many ways, Gordon Gekko did have it right, right?

P.S.  I think this also has to do with ever-increasing population as well… as in, the more people we have, the more things that get bought, benefiting public companies.  But this concept is for a different post.  :)

Stan Lee (a.k.a. Stanley Martin Lieber) passed today.

I tried to think of the right thought.  I have such terrific memories of diving into brand new comic books… but “thanks for the memories” just didn’t seem appropriate.

I was always entertained… but that seem to miss the significance of Stan Lee’s work.

So here’s what I know about Stan Lee and the teams of talented people he worked with over the years:

They knew how to create, no, craft a character.  Even with incredible superpowers, you could somehow identify with them and their situations… your frailties were their frailties… your fears were their fears… your hopes were their hopes.

My earliest hero was Spiderman… but later in life I branched out to just about every character he crafted…

… because I had something to learn from each.

So, ultimately, I want to thank Stan Lee for being a teacher and the greatest storyteller in my life.

Excelsior!

There’s a lot of noise in the market.

But there’s usually a lot of noise.

By definition — at any point in time — 50% of people think there’s enough bad in the market to sell their shares to the other 50% who thinks there’s good.

Can’t have a market otherwise.  That’s why I always scoff when someone refers to “easy” trading periods.  It’s never easy.

What helps guide you through the noise is whether your fundamental investment thesis is still intact.

Is mine?  I think the two biggest drivers of corporate profits — which drive the market — are the price of oil and interest rates.  Let’s see where they stand:

* While oil took a little run to the upside, I wouldn’t call it misbehaving.  In fact, it’s shed much of its 2018 gain

* Interest rates are spooking everyone… but 10-year is sneaking back down… and Trump’s on fire about the Fed messing things up — so much so that a few Fed governors have had to reiterate that they won’t, uhm, mess things up (i.e., “will still be accommodative for quite a while”)

* Sentiment is negative.  While that’s not comfortable, as a contrarian I prefer this

So, for me, at least right now, the noise is… just noise… and what we’re seeing is some healthy “letting some air out of the balloon”… which we like… so it doesn’t pop.

 

P.S.  A great example of “noise” was Caterpillar earnings.  They beat top & bottom line.  But everyone was fretting about China and tariffs… and the stock got pounded… even though if you read their commentary, you find CAT itself wasn’t so worried about the effect of China or tariffs on its business.  Here’s some commentary from their 10/23/18 earnings call:

* CATERPILLAR SAYS FEEL GOOD ABOUT EQUIPMENT DEMAND IN CHINA NEXT YEAR

* CATERPILLAR SAYS EXPECT BUSINESS TO CONTINUE TO IMPROVE IN 2019 VERSUS 2018

* CATERPILLAR SAYS CONTINUE TO EXPECT INDUSTRY SALES IN CHINA FOR 10-TON-AND-ABOVE EXCAVATORS TO BE UP ABOUT 40 PERCENT FOR THE FULL YEAR

* CATERPILLAR SAYS EXPECT IMPACT OF 25 PERCENT IMPORT TARIFF ON ADDITIONAL $200 BILLION CHINESE GOODS TO BE ‘QUITE MINOR’

These are all good things, right?!

I have to hurry this post because Microsoft is about to announce earnings.

For the first time in many years, Microsoft’s earnings are incredibly relevant again.

As many know, MSFT is in the process of successfully reinventing itself… to be a big-time cloud competitor.

Their earnings after the market closes today are important because the market is in desperate need of some kind of clear signal… either that things are still ok in tech land… or they’re not.

It just so happens MSFT is announcing before Apple, Amazon, Google, and Facebook… which means all eyes will be on their report.

Now, Microsoft has a reasonable stage set.  Adobe reaffirmed guidance last week… which I believe single-handled stopped the market from another 5-10% slide… since everyone was/is feeling like we’ve driven off a cliff… given tariffs… and global tensions… and interest rate hikes… and Trump acting decidedly unpresidential most of the time.

And Netflix killed their earnings, too, which even though it doesn’t seem like it, also helped provide some footing in this decidedly negative market.

But some disturbing things are still happening.  iRobot (IRBT), makers of my favorite electronic device in the world (Roomba!), killed their numbers, too… and the stock was still hammered today… simply because they cited some potential tariff impact… even though they still raised guidance.

What the market wants — craves — now is more assurance… that the consumer is still spending… that interest rates, while increasing, will increase in a slow and measured pace… that oil isn’t going to spike… that tariffs are having a positive effect somewhere in the food chain…

… essentially that the foundation for investment is still sound.

A good report from the once most dominate and influential tech company in the world… that has clawed its way back into relevance… could turn everything on a dime.  Stay tuned!

UPDATE:  Earnings were solid.  Beat on both top and bottom lines.  Stock was up almost 5% at one point in the after-hours market.  (BTW, Tesla TSLA also reported and nailed it… it’s up over 10% in after hours… and ironically they mentioned tariffs and it doesn’t seem to be impacting the pop.)

I was OVERJOYED by this headline:

Trump says each Cabinet secretary should slash 5% of their budgets after he pledges to cut spending

Remarkably, even one of the slipperiest* figures in politics, Kellyanne Conway, said something COMPLETELY INTELLIGENT:

“He’s asking them to cut the fraud, the waste, the abuse,” White House senior advisor Kellyanne Conway said on Fox Business Network. “Cut the fat, not the essentials.”

I think Trump should have asked for 10% — in business that’s considering an easy and smart cut as it forces you to really examine all of your projects and cut the worst performing one — but 5% is fine to get this party started.

 

*  Sorry for tongue-tying word but that describes her perfectly.

This shouldn’t be news.  On CNBC, no less.  It’s an embarrassment.  Grow up and be presidential, Donnie.

Trump-Stormy News