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Forget Sharknado. There’s a Tech-Nado sweeping through Wall Street!
Shares of Google (GOOGL) surged a whopping $100 at one point today, extending its recent gains over the last week to an unbelievable 26%. The move puts them at a fresh all-time high, and it came in the wake of strong quarterly results.
Specifically, Google said it earned $3.9 billion, or $6.43 a share, in the quarter. That compared to $3.4 billion, or $4.88 a share, in the year-earlier period. Adjusted earnings beat estimates by 29 cents a share, while revenue jumped 11% and talk of reining in expenses cheered investors.
Shares of Amazon.com (AMZN) also jumped to as high as $485 today, extending their rally over the past week to more than fifty bucks. In 2015 alone, the stock is now up 56%.
The latest catalyst was the Internet retailer’s “Prime Day,” a one-off, Black Friday-style event where it slashed prices on a host of items to boost sales. Amazon reportedly sold 34.4 million items, besting its one-day sales record from the day after last Thanksgiving.
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Investors were flocking to tech stocks this morning. |
Shares of Netflix (NFLX) have been en fuego, too. They jumped 18% yesterday alone, extending their year-to-date gains to a whopping 135%. I explained why yesterday, noting huge subscriber addition figures and optimism about long-term growth, particularly outside the U.S.
Bottom line: It seems like today, investors couldn’t be more in love with tech … but didn’t want much to do with anything else. Energy stocks corrected further, financial stocks lagged after a recent run, retailers pulled back, and industrials faded right out of the gate.
Me? I think that’s a worrying sign of a narrowing market. It’s great news if you own Google, Netflix, or a handful of other winners. But it’s not what you want to see if you’re counting on a broad-based, long-lasting market rally to new highs.
While I’m at it, I’d point out that the yield curve reversed its recent steepening trend. Short-term yields rose, while long-term yields fell, amid tougher talk from central bank officials like Janet Yellen this week. That means the market lost another prop.
Finally, the dollar continued to rally against most foreign currencies – a headwind that more and more companies are blaming for kneecapping their earnings and sales. Take Honeywell (HON), the diversified aerospace and industrial company. Sales fell 1%, rather than rose 4%, all because of the negative impact of the dollar’s move on its top line. Even the almighty Google suffered a $1.1 billion revenue hit because of the buck.
“Enjoy the Tech-Nado if you own those stocks, but consider lightening up elsewhere.” |
So sure, enjoy the Tech-Nado if you own those stocks. But consider lightening up elsewhere unless we see other sectors join in the fun … and the interest rate and currency markets start working in the stock market’s favor, too.
Any thoughts on the technology focus here? Is it a sign of health, or a reason to worry? Do you think it makes sense to jump on board what’s working, or dabble in the beaten-down sectors like energy that are ridiculously cheap? What about the dollar? Is it going to keep holding back sales and earnings for multinational corporations? Let me know over at the website.
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Banks may be trying to cut costs and physical locations by switching more customers over to online and smartphone-based platforms. But you definitely still appreciate the ability to transact at a local branch. The question is whether we bank customers are fighting a rear-guard action.
Reader H.C.B. said Microsoft’s Bill Gates was on to something when he said in 1995 that “Banking is necessary, banks are not.” His other comments:
“Clearly, Bill Gates saw many changes only now being more widely recognized. Change in finance and banking can only accelerate from here. Say hello to various non-bank financial services from Apple Pay to Google Wallet. Bitcoin and many new ‘crypto-currency’ alternatives are on the way in future years. Digital currency is going to eventually replace physical cash, I am afraid.”
But Reader Delores C. said she still makes several trips to a physical branch, and hopes they aren’t eliminated. Her view: “I live on the North Shore of Oahu, Hawaii, and our household having several bank accounts uses the bank branches here several times a week. I would find it a great inconvenience to have the branches go away here, although some of our sales are on the phone and on the internet.”
Reader Steve added: “I hope they keep accessible branches in all areas. Largely the older generation (my wife and I are over 70) rely on them, plus they are needed for loan closings that require physical presence.
“I am not comfortable using my iPhone for all the transactions like check cashing, and my wife has no smartphone and does not use the computer. She relies on one of the bank employees with whom she has a friendly relationship to give her the account balances and make transfers, etc.”
As for the business implications of moving toward a more branchless model, Reader Brent said: “If the banks were smart, they would be cross-marketing people who come into the branch. Problem is they have centralized so many functions and put people in the branches who have no authority. They must call the same call center and interminably wait, as customers do, for a live body who also has no authority to handle problem resolution.
“Corporate managers responsible for faulty policies and procedures have placed themselves off limits from direct contact with customers when problems surface that no one can solve. The branch personnel have insufficient training and seek better positions as soon as possible. Branch staffing has been significantly cut back in terms of raw numbers, also adding to poor customer service.”
Finally, with regards to the latest news out of Netflix and the “Tech-Nado” response we’re seeing in the markets, Reader Tom offered this perspective:
“As the father of five children, ages 17 to 25, I can tell you this generation is informed, aware and on top of everything. But they don’t read newspapers, watch much news on television, or go to the movies like we used to.
“Today Facebook (FB) is the largest publisher without creating any of its own content. Airbnb is the biggest hotelier without owning any hotel rooms. Uber is the world’s largest transportation company, without owning any vehicles. Are we surprised Netflix is growing by leaps and bounds? The times they are a-changin’!”
I appreciate all the insights, on the evolving banking industry, tech demand among the younger generation, and more. It will be very interesting to see how banks balance demands for a physical presence among a significant chunk of their customer base against demand from shareholders for higher margins and lower expenses.
If you have any other thoughts on these topics, make sure you stop by the website and weigh in.
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Greece’s German financial overlords took the first step toward approving the latest European bailout, with a vote of 439-119 in parliament. There will still need to be a second vote on the $94 billion in aid, but that looks like more of a formality at this point.
Experienced investors know that trading on margin can be dangerous, because borrowing money to buy stocks or other assets increases your potential losses if the market moves against you. But in China, it’s essentially the government doing it!
Chinese stocks surged overnight after news broke that China Securities Finance Corp. will have access to as much as 3 trillion Chinese yuan to buy stocks. That’s roughly equivalent to $483 billion in financial firepower the government-backed organization can borrow from the central bank and commercial banks to buy up the market.
Remember when talk about “Plunge Protection Teams” used to only come from the financial fringe? I sure do. Now, it’s a totally different ball game – with government officials openly admitting they manipulate the market to stem declines. Crazy world.
A naturalized American citizen of Kuwaiti descent shot up a recruiting office and a naval reserve facility in Chattanooga, Tennessee yesterday, killing four U.S. Marines before dying himself. Mohammod Youssuf Abdulazeez had no known terrorist ties, and the FBI is not sure if this was a random event or directed from overseas.
Speaking of mass shootings, Aurora, Colorado shooter James Holmes was convicted of 165 charges related to the 12 deaths that day three years ago. Jurors rejected his insanity defense, and he will either be sentenced to life in prison or death during the penalty phase of the trial that will unfold in the coming weeks.
Thoughts on the latest shooting massacre? China’s artificial market support? The German vote in favor of Greek aid? Or any other topic I didn’t cover? Then let me hear about it over at the website.
Until next time,
Mike Larson
{ 22 comments }
Nice balanced article..no over excited/hype for dealing in energy/stocks..Gold’s bottoming..worth a mention, amidst insolvent governments..
True GLOBAL GROWTH IS HARD TO COME BY
Technology, or at least the biggest and best known names are now momentum plays, as the NADAQ is once again in the lead at the racetrack. Facebook is up about 5% in one day with .23 a share fist quarter earnings. Quite a number, isn’t it? How much will FB’s 2nd Qtr. earnings be up and how high will they be? Didn’t the Chinese Red Chips have some earnings (growth) too?
Ultimately, if the earnings in U.S. tech stocks are not there, then its speculation and bullish investor sentiment propelling them higher. As such, it can reverse at any time. Accordingly, some have already called this Bull Market the “Facebook Market” ( not Janet Yellen’s Market). So, its not just about fundamentals, stupid. Think “Liquidity”. You can bet Janet Yellen is thinking about it all the time, and then “standing pat”.
At that point, what was so unique about the Shanghai Stock Market’s rapid rise in the last four months before it crashed? Are we truly that exceptional here in the NYSE or did Chinese (investors) simply change horses in the global race? We will all find out soon enough. Ladies and Gentlemen, please place your bets.
https://www.youtube.com/watch?v=fGjj9wfzJdM
Gold closed at at1133 odd, only a bit below the 1140 area that had been its bottom for over a year, but it was a weekly close, which is technically supposed to be more important. That may be the beginning of a drop to Larry;s 900 to 1000 area, or even his more drastic 700/800 price. Definitely don’t jump in until it stabilizes for a time.
As for China’s stocks, after the big drop, they bounced sharply, but the bounce is waning, and they may far farther. Wait there also, until they stabilize a bit.
So Mike and family are on a cruise. Does he plan to log in by satellite and keep up this column, or let someone else take over for a bit? I hope it is an enjoyable trip. but we’ll miss him if he drops out entirely for a week or so.
Its different this time, say the talking heads. The U.S. Stock markets seem unstoppable. Isn’t it always to same? All that money to be made in a rocketing market.
I love to make money. I really do. But this market feels a lot like the Tech Wreck of 15 years ago. Everyone was throwing their money at anything tech. I mean any old idea.
And then it all came apart. The crash was ugly. All that money that was ‘invested?” just somehow disappeared. It was like magic. Now you see it. And….now you don’t.
Friends, the markets here are in a bubble. Pure and simple. They will crash. You may think you can hold on until the very last second and have all your stops in place and you feel total confidence. But when it happens again, the computers will not be able to handle the volume or the orders. You will get sucked in to the black hole along with all the other true believers. Your broker will not be able to answer all the calls. You will not be able to reach your broker. You will sit there watching as your money disappears.
GET OUT RIGHT NOW WHILE THERE IS NO PANIC. You may miss a little profit. But you will not lose your shirt.
That is my advice. But hey, who ever said a gambler is reasonable or rational?
I agree. We should see a little more upside (say 18600 or so on the Dow)….but I think the days left in this rally are numbered.
So Amazon has amazing sales, but lowers their prices and probably loses money doing so. And then their stock prices soars as a result. Whatever happened to the concept of actually making a profit as a sign of a successful business. The only thing Amazon is doing is to kill off more and more businesses. Bezos is nothing but a greedy and power hungry @$$hole. He is the epitome of all that is wrong in the USA and it will all come crashing down. Hopefully sooner than later. This kind of greed is nothing but a cancer that will destroy and kill this country. Capitalism is owned and run by the criminals. Doesn’t anyone recall the tech crash of 2000? Here we go again.
Here’s a shocking revelation. The tactics being used by Amazon/Bezos are precisely those formerly used by the Standard Oil Company/ Rockefeller. They both use(d) their resources to drive competition out of business. The approach is to cut prices mercilessly, then raise them once the competition folded. This is good capitalism, admittedly driven by greed and ambition. It’s not new, and it won’t end here. There are also many other examples in U.S. Corporate history.
Massacres
It must be a factor of life in the U.S.A. that you have to be insane. Can’t the public see the connection between guns being freely available and the ongoing gun massacres. Surely they must be able to see the world statistics on this crime and disregard the NRA lunatics.
In hope of sanity!
Dear kontac, Put down the Kool-Aid and back away from the keyboard, There are millions of guns that do no harm….ever. It’s the people that pick them up. It’s not a hard concept to grasp. It may not be easy to fix but it’s certainly easy to understand.
If these unbalanced people couldn’t get a gun they would use something else. In the meantime you would leave the good guys defenseless? Not smart. Jim
It should also be noted that every one of these shootings has occurred where the perpetrator knew guns were not allowed.
Still waiting for an energy update from Mikie!
Amateur Energy Update: I mostly invest in energy stocks, long or short depending on conditions, because it’s the only industry I really know anything about. I was cautious about Mike’s original call but felt in the long run he would be right. The refiners and tankers have done fine but the rest have been downright lousy. Looking through the Business Daily rankings today I could not objectively see anything but a bunch of really good, solid companies thoroughly trashed, I think unfairly. Even those with decent earnings and balance sheets are being treated as if oil will never shine again, which is unlikely. I know its painful, but every time in the past when I have felt that overwhelming urge to bail I have been wrong. I too am feeling that urge now but precisely for that reason I intend to stick it out. Even if I continue to take a beating over the next few months I still expect to be glad I did in the not too distant future. I may even do some down averaging. Too many very powerful interests want higher prices for this slump to go on very much longer. I am not an expert but this is my past experience, for what it’s worth. Jim
Until the banks give us the ability to print our cash at home, I think we still need to go to the branches to withdraw cash. (ATM fees can be high if you don’t use the machines connected to your bank.) That is, as long as cash is still in use.
DEAR MIKE! IM THINK ABOUT PROGRESS AMERIKA. WANT HELP INVESTOR AND PASTOR.MY DISCOVERY VERY STRONGL.THANKS! GOD BLESS YOU! SERGEJ LEVCENKO
It will be interesting to see if went the Chinese government buys up shares of private Chinese companies that puts Chinese officials on the boards of those companies. It could effectively become a reversion to quasi-state-controlled industry. That would not bode well for Deng’s privatization move a decade or so ago that blossomed into China’s huge move to economic power.
How about the Chinese companies that buy out American companies. At last some of these companies are really controlled by the PRC, so I guess the U.S. companies may get PRC officials on their boards.
I visit my bank branch at least twice a week. Most older persons like myself do. And now that the “baby boomers” are beginning to retire month after month, banks will have an enormous crowd of bank customers who never saw a computer or iphone before the age of 4 50 or more. I think that e commerce may get a vacation for a few years. PR
Root, you used a computer to read this issue of Mike’s missive. It takes little more effort to bank on-line. I’m mid 80s, and figured it out. Have more problems with periodically changing passwords and security questions than anything else, but that helps security, so put up with it.
Mike what do you think of the dialog on DSR’s and the IMF with China in the mix for a new world currency–not the US dollar come October and it’s impact on the value of the US dollar–instant disaster as being portrayed?????????????