Face-Off: Microsoft vs. Google

By Taryn Cooper, at 1:12 pm on March 1st, 2010

In the spirit of yesterday’s closing ceremonies at the Olympics, I would say that — much like Team Canada vs. Team USA — a turf-war has erupted between two American-as-Apple-Pie tech companies.  Perhaps you’ve  heard of them.  We have “Microsoft” on one side, and another named “Google” in the defensive zone.

Microsoft has been incredibly vocal with its accusatory stance against Google, suggesting their business is anti-competitive.  Microsoft is no stranger with being accused of monopolistic practices, back in the late-90s going through that themselves.

The thing that stands out to me is whether Microsoft should care or not.  Let’s be fair, these two companies are like Goliath vs. Goliath.  While there is healthy competition in the technology space, each is successful and has their niche in their own right.   While they have similar products, typically Microsoft and Google target different populations but are potentially each other’s biggest competition.

I can’t say whether Microsoft is simply picking on Google because they can, but it seems interesting to me that several outlets today have picked up the idea that Microsoft is encouraging victims of Google to file complaints with regulators on their anti-competitive practices (an idea, that by the way, Microsoft is denying).

It appears as though Google is getting their licks in the media — you know, the whole saying of building something up just to tear it down, etc etc.   And with it’s trouble in China, along with its Google Books drama in the U.S., Microsoft’s deputy general counsel Dave Heiner also wrote in a blog post today that “Google’s way of working with advertisers and publishers makes it hard for Microsoft’s competing Bing search engine to win search volume.”

I wonder how long it will be before Google starts taking its public licks, much like Microsoft did in the late-1990s, for being the monolith it was but it’s still standing and of course, won’t be going away anytime soon.  The same could be said for Google, as it’s going through it’s growing pains of falling out of favor.  We’ve seen evidence of this recently with public fall-out from it’s Buzz launch, which had many more “ifs” involved in its release than answers.  To me though, I think that Google will walk away from this unscathed, as they have a team of lawyers working for them to ensure that whatever may happen quickly goes away.

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Gold Moves Higher, Tech Dips

By Robert Perrego, at 10:44 am on November 21st, 2009

Last week saw gold trade another all time high while the overall market inched higher.  The tech sector, as represented by the Nasdaq 100, performed the worst with a weak day on Thursday accounting for most of the loss.  A downgrade of eight stocks in the semiconductor industry, which affected $126 billion in market cap, caused leader Intel Corp. (NSDQ: INTC) to lose over 4%.  The downgrade came on a day that saw the Mortgage Bankers Association report that 14.4% of all homes with a mortgage were either at least one month delinquent on their mortgage payments or in foreclosure, an all time high.

The Dow Jones industrial Average gained 0.46% this week while the S&P 500 lost 0.19%.  The Nasdaq 100 moved the most, but in the wrong direction, slipping 1.35%.  Gold continued its march higher with a 2.9% gain for the week and an all time high close on Friday.

The week started with Fed Chairman Ben Bernanke speaking to the Economic Club of New York.  The dollar peaked this year as the stock market bottomed in March, but has been dropping steadily ever since.  Bernanke controls short term interest rates and this interest rate has a lot to do with the strength of the dollar as denominated in other currencies.  The Fed is in a tight spot here as unemployment is above 10% and if you have noticed an ‘economic recovery’ you are one of the few.  The stock market has rebounded enough to be put in the same sentence as ‘bubble‘, and GDP stopped dropping like a stone, but for most the country times are tough.  The dollar is inherently political too.  If Bernanke defended the dollar by raising rates with the 2010 elections a year out, any negative effect this could have on the ‘economic recovery’ might get him fired.

Bernanke gave the all clear signal to people shorting the dollar, stating that interest rates were to remain low for the foreseeable future.  The dovish interest rate stance Bernanke gave fired up the bulls and they started shorting the dollar and buying stocks.  The Dow Jones rose 136 points and the market broke out to new 2009 highs.

Tuesday and Wednesday saw little movement in the market indexes as San Francisco Fed President Janet Yellen commented to her audience in Hong Kong about whether or not The Fed should get involved with the financial markets.  Obama’s visit to China, and his pledge to ask that the yuan be appreciated, centers on the dollar again.  There are more than a few Chinese officials that are blaming the very low interest rates here in the U.S. with creating bubbles in real estate and the market IN CHINA!

On Wednesday the Mortgage Bankers Association came knocking with their first set of bad numbers.  Purchase Applications came in below expectations as no houses being sold means no mortgages applied for.  New York Spot Gold traded an all time high of $1,153.90 an ounce.

Before the open on Thursday, Merrill Lynch downgraded the semiconductor sector and the Mortgage Bankers were back with that huge 14.4% number.  The market plunged off the open and by 11 a.m. the Dow Jones Industrial Average was trading 10,256, down over 150 points.  The market crept back and with a spike up at the end of the trading day losses were cut to less than 100 points.  Microsoft came out with an update on Windows 7, stating that sales were at a record pace.  Then something strange happened… on Thursday the dollar rose AND so did gold.

Thursday after the close Dell Inc. (NSDQ: DELL) reported weak earnings.  This added more selling  pressure to the tech sector after Thursday’s semiconductor rout and Friday opened with a gap down in the market.  The market traded lower until about 11 a.m. but then trended upwards for the rest of the day.  By the close of the day the Dow Jones Industrial Index had pared its loss to 14 points .  The dollar rose again on Friday and the PowerShares DB US Dollar Index (NYSE: UUP) gained 0.54% on the week.

This gave gold a 2.9% gain on the week and the dollar tacked on 0.54%.  For the most part, the dollar and gold are inversely related as gold is traded in dollars.  The dollar carry trade has linked gold to the market as the carry trade cowboys are shorting the dollar to buy the market, and to buy gold.  These days if the market is up so is gold and if the market is up the dollar is down.

This week the dollar was up, gold was up and the Dow Jones Industrial Average was up.  The broader S&P 500 was down slightly so the inverse dollar-market relationship held.  Gold moved higher on two days that the dollar moved higher.  Strange things like this can happen when you reach an all time high as it sometimes seems all everyone says is ‘gold, gold, gold’.  While a mania might be building around gold and one of the other things you hear with gold is ‘bubble’ bubble, bubble’, the fact that central bankers from Russia to Mauritania to Chile are buyers tells me all I need to know.  Gold is going higher.

Dell Earnings Weigh on Tech, Market Drops Marginally

By Robert Perrego, at 5:59 pm on November 20th, 2009

Merrill Lynch downgraded the semiconductor sector yesterday, causing chip giant Intel Corp. (NSDQ: INTC) to take a 4% hit.  Today it was the computer maker that boasts “Intel Inside” turn to get hit as after the close yesterday, Dell Inc. (NSDQ: DELL) reported earnings that were five cents below expectations ($0.23 vs. $0.28).  Dell also missed their top line revenue number by $300 million ($12.9 billion vs. $13.2 billion) and the stock got hit for 9.95% today, dropping $1.58 to $14.29.  The market was down most of the day but staged a late  rally, turning the Dow Jones Industrial Average positive briefly.  However, the tech heavy Nasdaq 100 opened in negative territory and stayed there all day.

The Nasdaq 100 dropped 8.80 points (-0.49%, 1,764.39) and was the weakest of the three major indexes.  The Dow Jones Industrial Average lost 14.28 points and was in positive territory fifteen minutes before the closing bell, but slid into the weekend.  The S&P 500 lost 3.52 points (-0.32%, 1,091.38).

The strongest news of the week probably came from Microsoft (NSDQ: MSFT) as they reported ‘Windows 7′ sales are very strong.  Mr. Softy went out at $29.62 this week and this stock has not seen these levels since June 2008.  I recall some of the talking heads on TV recommending buying Dell a month ago or so, on the premise that the whole computer upgrade cycle sparked by ‘7′ would benefit the computer maker.  We got the answer to that thesis today.  Try again.

D.R. Horton Inc. (NYSE: DHI) released earnings today and lost $0.73 a share which was much better than a loss of $2.53 a year ago.  Analysts expected a loss of $0.30 and this miss brought a fresh wave of selling into the home builders.  Yesterday home builders were hit on a Mortgage Bankers Association report saying that 14.4% of all homes with a mortgage were at least one month delinquent on their payment or in foreclosure.  D.R. Horton got hit for 15.34% today (-$1.88, $10.37) with most the other home builders losing about 3 to 3.5%.

The SPDR Gold Trust (NYSE: GLD) went into the weekend with an all time high close.  Gold has been strong all week, with the GLD closing on its high for the day at $112.94, just 15 cents below its highest trade from Wednesday at $113.09.  New York Spot Gold was up $5.10 an ounce at $1,149.70 (+0.45%, 4:51 p.m.).  Everyday the financial media devotes much attention to gold, and while there are a few gold bears out there such as Nouriel Roubini, the majority of the pundits and financial professionals are very bullish on gold.  There are many arguments to be made about why you should be a bull on gold, ranging from inflation to deflation, declining gold production, the weak dollar, etc… but the only one I need to know is that central banks have flipped from being net sellers of gold to being net buyers.

Nymex crude dropped 74 cents a barrel today and finished the week at $76.72, after trading above $80 a barrel briefly Wednesday.  As oil peaked at just over $80 at about noon on Wednesday, the dollar was trading its low of the week.  The dollar traded higher both Thursday and today and all the carry trade cowboys that are short must be getting nervous.  We could see a spike higher in the dollar if some event triggers a short squeeze as this carry trade is very, very crowded.  The longer term direction for the dollar is most likely lower, but these squeezes can be brutal to sit tight through if you get caught short.

We have a short trading week next week as Thanksgiving Thursday gives the U.S. markets the day off.  Usually Friday is marked by light volume as many traders take the four-day weekend.  We get a GDP report on Tuesday but the week is light on other economic reports, which might be a good thing.  I don’t know how many more housing numbers the market can take like the ones we got yesterday.  It’s Friday and lets worry about that next week.

Have a great weekend!

Semiconductor Downgrade and Mortgage Numbers Drop the Market

By Robert Perrego, at 4:29 pm on November 19th, 2009

Merrill Lynch downgraded eight stocks in the semiconductor sector and lousy numbers out of the Mortgage Bankers Association added up to a down day for the stock market.  The downgraded semiconductor companies had a cumulative market cap of $126 billion and that is a lot of money to everyone but the United States Congress.  The downgraded companies included Intel Corp. (NSDQ: INTC), Texas Instruments Inc. (NYSE: TXN) and Marvel Technology Group Ltd. (NSDQ: MRVL).  The Mortgage Bankers Association reported that 14.4% of all homes with a mortgage are either in foreclosure or delinquent in Q3, which works out to 1 in 7 mortgages being at least one month behind on their payments.  This is an all time high count for home owners not being able to hack the monthly house payment.

Intel dropped 82 cents (-4.07%, $19.30), Texas Instruments lost 87 cents (-3.37%, $24.88) and Marvel slid 82 cents (-5.09%, $15.27)

This took the Dow Jones Industrial Index down 93.87 points (-0.90%, 10.332.4) as a rising dollar also pressured big cap international companies and commodity and materials stocks.  The S&P 500 lost 14.90 points (-1.34%, 1,094.90) and the tech heavy Nasdaq 100 was knocked down 28.55 points (-1.58%, 1,773.19)

Bill Gross, bond fund manager extraordinaire, wrote “Raise interest rates with 15 million jobless and 25 million part-time working Americans?  All because gold is above $1,100?  You must be joking or smoking – something.”  It seems every person that pontificates on the economy is coming up with the same conclusion lately, this being that interest rates are not going up for quite some time, jobs will be slow to come back, and basically we’re screwed.  Keeping rates this low may result in a problem with inflation in the future and everyone sees an asset bubble at every turn.  Ahhhh, good times.

30-year Mortgage rates are below 5%, the first time home buyer tax credit has been extended and still no homes are being sold.  Worse yet, no one seems to have a job and everyone forgot how to get that check into the mail on time.

So what is going up?  Gold, oil, copper, sugar, coal, etc…  Pretty much anything you can hold, that is not backed by the U.S. Government.  The U.S. Treasury stamp is unidirectionally down so badly, that if you stamped it on an ounce of gold it would probably be worth 5% less automatically.  It is even possible that if you hold a hula hoop long enough you can sell it as scrap plastic at a profit.

If you are unemployed here is a hot tip – move to New Jersey’s 5th Congressional District.  Recent tracking of the economic stimulus dollars have shown that they created 4.5 jobs there at a cost of $75.2 million.  I put my resume in this morning – that is a $16.67 million paycheck.  Don’t ask me how they created half a job, but I will take half that salary!

Think positive.  Microsoft is selling Windows 7 at a record pace in their first month of sales.  CEO Steve Ballmer says sales are running twice as fast as past releases of Windows .  This may be because Vista was not well received at all and buyers have been waiting for ‘7′ for years now.

More good news.  House Speaker Nancy Pelosi (D-CA) announced that if the ‘trader tax’ is enacted it must be international.  Recognizing that a lot of hedge fund and international bank trading business will flee overseas, Pelosi lengthened the odds this tax sees my, or your, wallets.  Pinch me, I must be dreaming.

Again gold hung tough in the face of a rising dollar.  The dollar was up 0.31% and New York Spot Gold still gained 90 cents an ounce to $1,144.30.  Nymex crude cracked and gave back recent gains, dropping $2.12 a barrel (-2.65%, $77.73, 4:01 p.m.) on economic weakness as people not working or paying their mortgages will stop buying a lot of gas any second now.

Well I will leave you on an upbeat note; there are no economic releases tomorrow and we have an NFL game on TV tonight.  If you are in the State of California, watch it on your big screen now while you can.  Believe it or not, the brilliant politicians who have created a $21 billion budget deficit, just outlawed most large screen TV’s in the Golden State to save money.  I have two words for you all – ‘budget cuts’.

Knowing this and how much the government is paying in the 5th District in Jersey, I would actually rather move to New Jersey than California these days.

Wall Street Wrap – Amazon and the Dollar Trade Up, Market Drops

By Robert Perrego, at 4:56 pm on October 26th, 2009

Amazon.com Inc. (NSDQ: AMZN) continued its earnings driven momentum higher today adding another 5.2% to the 27% it gained Friday, after announcing earnings Thursday after the market close.  Jim Cramer of ‘Mad Money’ fame stated today that Amazon is the “low cost producer on the web” and is now beating Wal-Mart Stores, Inc. (NYSE: WMT) at that game.  Most people view Amazon as an Internet retailer, but what sets Amazon apart is their technological edge.  Amazon is one of the dominant forces behind the development of cloud computing, a cutting edge area of Internet development, and when you have Ph.D.s on staff trying to figure out how to sell books and iPods better, you have an advantage.

Amazon closed up $6.15 (+5.19%, $124.64) while the rest of the market had a rough slide lower.  The market traded as much as 100 points higher off the open this morning, but at 11:08 a.m., a large block of shares were traded in the PowerShares Dollar Bull ETF (NYSE: UUP) which reversed the dollar ETF from being down 5 cents ($22.38) and after this the dollar traded up as high as $22.60, a 1% intra-day move before closing at $22.58 (+0.66%, +$0.15).  At 11:08 a.m. the Dow Jones peaked at the high of the day (10,070) and reversed to the day’s low (9,849) dropping 221 points intra-day.  The Dow closed down 104.22 points (-1.04%, 9,867.96) while the S&P dropped 12.65 points (-1.17%, 1,066.95).  The Nasdaq showed relative strength on the backs of Amazon and Microsoft, losing only 6.88 points (-0.39%, 1,746.75).

Finance led the sector race lower dropping 1.50% with the multi-line insurers getting clobbered.  Genworth Financial (NYSE: GNW) dropped 7.93% (-$0.84, $9.56) and American International Group (NYSE: AIG) dropped 6.81% (-$2.65, $36.25).  The energy sector was the second biggest loser dropping 1.47% with National Oilwell Varco (NYSE: NOV)dropping 5.43% (-$2.55, $44.34).

Gold, oil, commodities, commodity based stocks and the stock market as a whole dropped on this dollar strength.  The UUP traded 6.85 million shares today, second only to the 6.98 million it traded on September 22, 2008.  The UUP closed right up against the down trend line that has been the defining trend line in the dollar since its second peak of a double top on March 9, 2009.  Remember the significance of that day?  That was the market bottom for the major indexes – Dow 6,547, S&P 500 676, Nasdaq 100 1,044.

New York Spot Gold lost $16.60 an ounce (-1.57%, $1,038.20, 4:06 p.m.) and Nymex crude dropped $1.82 a barrel (-2.26%, $78.55, 4 p.m.)

How far the dollar can run will be in part influenced by this week’s record sale of $123 billion in Treasury Notes.  Also, the Fed is expected to end its $300 billion debt buyback program by the end of the week.  This completion of the debt repurchase plan and the planned sale of a large amount of debt, caused the 10-year to drop and interest rates rose to their highest level in two months.  The higher the rate paid by treasuries, the more the dollar is worth, relative to the rates other currencies earn.

The market seems to be liking the weak dollar, as since the UUP peaked on March 9th it dropped 16.6% to its low close last Thursday while the Dow rose 54% during this same time period.  If the dollar continues upwards from here, weakness in stocks would be the result if the recent ‘Dollar up, Dow down’ relationship continues.

Economic reports due out this week:

  • Tuesday: 10 a.m. Consumer Confidence (54 expected)
  • Wednesday: Durable Goods Orders 8:30 a.m. (1.5%) and New Home Sales 10 a.m. (440K),
  • Thursday: 8:30 a.m. GDP (3.0%) and Jobless Claims (525K)
  • Friday: 8:30 a.m. Personal Income and Outlays (0.0%, -0.5%) and Employment Cost Index (0.5%), at 9:45 a.m. Chicago PMI (48.5) and at 9:55 a.m. Consumer Sentiment (70.0).

Earnings due Tuesday (b = before the market opens, a = after market close):

ACE 1.97 a, AKS 0.00 b, ACL 1.45 a, APOL 1.04 a, AVY 0.57 b, BIDU 1.78 b, BP 1.03 b, CP 0.76 b, CRS -0.23 b, CE 0.43 b, CX 0.14 a, CHE 0.88 a, CPO 0.63 b, CTS 0.07 a, DAI -0.40 b, DV 0.65, DWA 0.16 a, ETFC -0.09 a, ECL 0.60 b, FE 1.03, FTI 0.63 a, FPL 1.43 b, BEN 1.32 b, HRS 0.77 a, IACI 0.13 b, JCI 0.50, LLL 1.85 b, LCAV -0.30 b, MEE 0.17 a, MCK 1.01 a, NSC 0.79 a, NTRI 0.24 a, ORB 0.10 a, PCAR 0.02 b, PDLI 0.26, PLT 0.31 a, RYN 0.41 b, SAH 0.24 b, TXT -0.03 b, X -2.87, VLO -0.33 b, V 0.72 b, WAT 0.77, WYNN 0.15 b