Come Back,  Come Back, Come Back…

Those were the words that Kate Winslet spoke as she saw the rescue boats disappearing from her sight in the movie Titanic. Well, tonight the CEO of Yahoo is yelling the same thing. But in this case it is Microsoft that he is yelling "come back" to.

Jerry Yang may end up on the top 10 list of stupid CEO’s for his reluctance to take an offer that was put in front of him. His shareholders would have been able to get something that Jerry Yang could not give them, a healthy return for their investment. But Jerry Yang thought his company was worth much more, and in playing hard to get, Microsoft just said "go pound sand" and left Jerry having to answer to his shareholders. And they are not happy one bit. Shareholders are already calling on a complete dismissal of the top brass, including Jerry Yang. Shareholders want Jerry Yang’s head on a plate.

So, now that Jerry has his shareholders circling his house carrying torches, he is calling on Microsoft to "come back". But will they? If Microsoft is smart they won’t. Look, Microsoft and Yahoo are both bad companies. Each company has not been able to grow organically, they have been stagnant for years. Yahoo has a terrible business model with no solid growth potential, and Microsoft’s business model is one built on ‘upgrades’. Yep, keep updating software and selling upgrades year after year after year. Their latest operating system, Vista, is considered by many as one of their worst blunders. A poorly designed operating system that bogs down all but the most speedy computers. What would the joining of Microsoft and Yahoo brought to the world? An even bigger company that goes no where.

Yahoo’s search engine technology is far behind that of Google, and Yahoo has little in the way of any other revenue generating business, and relies on advertisement sales and ‘click through’ ads. Microsoft would have been buying a company with poor organic growth and ‘behind the times’ search technology. Just what an already stagnant company needs… to buy another stagnant company.

Jerry Yang had his chance to sell his company and give his shareholders something for their time of hanging on to the stock for so long. He thought there might be a bidding war for his company and could get a higher price. Mr. Yang, what on earth do you smoke everyday? Have you looked at your company lately? Bidding war indeed. So what are you going to do now Jerry? If I were you I would go to Disney World and see if you can get a job as ‘goofy’, for you are already VERY qualified.

And Microsoft, as long as they continue their ‘upgrade’ business model, then there is nothing worthy for people to want to buy shares of that company. For the past eight years Microsoft has not shown any material share price growth. Trading in a range for many years is not my idea of a good investment. Oh, the divended you say?  Stocks that pay dividends are of no value and should never be used to justify ANY stock purchase. Stock price growth potential alone is, and always should be, your criteria for choosing what to invest in, not because they pay a dividend. We wrote about this in the past, and we will cover this topic much more in the future.

So what happened today? More selling that was fairly broad based. The exception being that commodities are working their way up once again. Gold and oil were up today, the US Dollar has rolled over and has been heading back down again, and suddenly now the market is paying attention to corporate earnings. And to the markets surprise, earnings have not been so hot. Surprise, Surprise, Surprise! As of May 2nd (2058 companies have reported), earnings for this quarter are down 18% on continuing operations net, and down 19% on total net income compared to one year ago. And no, I’m not going to exclude the financial sector like they do on CNBC. They are part of the broad measurement of corporate health and they shall remain included. 

This morning we has the Non manufacturing ISM data. On the surface the number was higher than expected. But contained within the data we see that business activity declined from last month, exports are down (you know, exports, those things the Government say is keeping our economy afloat), and prices paid for goods continues to climb ever higher. As they say, the devil is in the details.

Not much in the way to show in charts tonight, the markets are still at a period of ‘indecision’. And it appears that fear is moving back to the front of the line once again. The battle wages on…

Bank of America answers, kind of, by saying the deal to acquire Countrywide is still a "go."  Guess they had to say something, but, honestly, who believes a thing coming out of that institution.  The Dow closed below 13000, but the S&P hung in there to stay above 1400.  Oil keeps going up, although the USD managed not to fall off the cliff (hanging by it’s fingernails).  Selling into strength hasn’t abated, so keep that in mind as you daytrade.  There didn’t seem to be any rhyme or reason to today’s trading, just hit and miss, but there did seem to be some buying interest in the oil/agriculture/metals again.

Some news on the oil front:

US ENERGY SEC BODMAN: WILL SPEAK TO CONGRESS THIS WEEK ABOUT SPR, SCHEDULED TO TESTIFY THURS.
- Notes are doing ‘everything we can’ on prices<USO>

UK OIL MINISTER: THE ERA OF CHEAP ENERGY IS "WELL AND TRULY" OVER
- The "psychology premium" on oil is hindering economic growth.  (Haven’t heard that one before, "psychology hindering the economy….wow)

Banks are being stingy (out of necessity, I imagine):

FED REPORTS A NEAR RECORD PACE OF TIGHTENING IN LOAN TERMS, CONSUMER BUSINESS LOANS NEAR THREE-MONTH LOW - FED LOAN OFFICERS SURVEY
- 80% of US banks tightened lending, 55% of overseas banks tightened.
- 65% of US banks reported weaker demand in April for subprime loans v January demand.

And Blackrock (BLK) is looking to take some "sludge" off of UBS’s hands.  Where some see cow pies (manure),  others see sweet chocolate (risky business, Blacky, good luck with that):

IN TALKS TO MANAGE SUBPRIME TAINTED DEBT FOR UBS, FUND WOULD HOLD UBS MORTGAGE ASSETS
- BLK targeting returns in excess of 15%, BLK in talks with other banks to manage assets
- The UBS fund to help bank recover from $38B in writedowns

See ‘yall later!

Volume on the NYSE is about 30% lower than the 6-month average, but about par on the Nasdaq.  Decliners outpace advancers on both.  The US Dollar had a little spike on the better than expected non-manufacturing number, but has since given up all the gains.  Gold is up from Friday and oil futures for June have now hit $120.  The indices continue to trade in a seesaw pattern.  Still waiting to hear from Bank of America on what they plan to do.  It could be, as one of our readers stated, that they will be asking the Fed to backstop CFC’s bad debt, the same as they did for JP Morgan’s takeover of Bear Stearns.

Ratings agency Fitch says Countrywide (CFC) debt could be cut if it is not fully supported by Bank of America (BAC).  What say you, BAC?

It’s higher than expected, and prior was 49.6.  New orders down slightly, with prices paid up a bit.

APRIL ISM NON-MANUFACTURING COMPOSITE: 52 V 49.1E
- Employment:  50.8  v 46.9 prior
- New Orders:  50.1  v 50.2 prior
- Prices:   72.1 v 70.8 prior

"The credit crisis is more than half over"

"We’re in the 8th inning of the credit problems"

"The problems resulting from the credit markets has just begun"

"The market stresses are in the final innings, but it may be a double header"

And on and on… Those are just a few quotes from the past week or so from various bankers and Fed officials. No one agrees, and those who are claiming that it is almost over are the ones that said in the beginning that the problems would "not spread" and "was well contained". News magazines and financial commentators are also chiming in on their prediction on just how much is left in this credit implosion situation. The most striking thing to us is that those who are claiming all is well and it is almost over are for the most part the ones who never recognized the growing problems last year in the first place.

The bottom line is that no one knows how far this will go. Talk of 8th inning, half over, and other rhetoric is all worthless in our view. We stated last July that the credit problems would get worse. And today, we say that the extent of how far this can reach remains high. We can’t and won’t say how far along the problems are, but we will say the risks of the credit implosion impacting other parts of the economy remains just as high as it was 3 months ago.

Microsoft has backed away from Yahoo, no deal. Lots of money will be lost today for holders of Yahoo stock. We surmise that in the coming week it is likely that Jerry Yang (CEO of Yahoo) may be required to step down by pressure from the Board of Directors. Yahoo, is a ‘dead stick’ now.

The cause for the tumble in the futures in the overnight hours can still not be identified. Someone wanted to unload, but who and why?

Economic Data & Earnings Calendar

Monday

• 8:30 am : Fed Chairman Ben Bernanke speaks on mortgage foreclosure issues.
• 10:00 am : April ISM (Services) (last 49.6)

Before the Open: ACW, AMRI, ANR, ALO, ALVR, BKI, CZN, CMS, CNO, CORS, GG, GAP, HAIN, HEW, INXI, MVL, MCY, NTE, NSTC, NGPC, NAT, NOVN, ORBK, PPC, PMI, POR, RRST, STEC, TDW, WLL.

After the Close: JOBS, ARG, ALJ, AIMC, APC, AGII, ALC, BAS, CECO, CLF, CSA, DIVX, DLLR, DSCM, ERES, FST, HHGP, HGSI, IBI, INTX, KND, LF, LOOK, MNKD, MCK, MERC, MWY, NLS, EGOV, OMPI, OTTR, PKY, POM, FACE, PBI, PPS, PWAV, PFG, PSB, QGEN, RADN, RAE, RAS, RTEC, SMG, SPRT, SYKE, SYMM, TX, TNS, UDR, VM, VMC, VYYO, WTW.

Tuesday

• 7:45 am : ICSC/UBSW Chain Store Sales Data
• 8:55 am : Redbook Retail Sales
• 9:30 pm : Fed Member Heonig speaks in Denver on market risk and policy

Before the Open: APAC, WTR, ARJ, ATRC, ABX, BBG, CSE, CPHL, FUN, CHD, XEC, CXW, COV, COWN, DK, UFS, RRD, DHI, ECLP, EMS, EMR, EL, FNM, FTE, FTEK, WOLF, HSIC, HDIX, HPT, HURN, HYGS, ITWO, IAR, IPGP, LAZ, LMIA, LPX, MMP, MLM, PCS, MGM, MDH, TAP, MYGN, NSSC, NURO, NYX, PTRY, PKD, PEI, PFGC, PRGO, PQ, PCG, PLA, PCP, PEG, Q, SLE, SIRI, SKH, SE, SPC, JOE, STXS, TKLC, THC, TEVA, TWGP, TDG, TWP, UNT, VTAL, VNO, WTI, WWE, XRIT.

During Trading Hours: SNHY.

After the Close: ACAS, ACLI, ASYT, STHN, BIDZ, BIO, NILE, BDE, BEXP, CELL, CRL, CHRD, CHDN, CSCO, CNL, CRK, CPTS, OFC, CUTR, TRAK, DM, EGLE, EXP, ESE, XCO, EXEL, EXLS, GSX, CHDX, GGC, HCKT, HAR, HLEX, HLS, HLTH, SOLD, HYC, IIG, IO, JCOM, JKHY, KCP, LIZ, MFB, MCHX, ME, MXWL, MFLX, ORCC, ONXX, OPTV, OPMR, OSUR, ORA, OSIP, PACR, PEC, POL, PRXI, QSII, RFMD, RUTH, SLXP, SOMX, SRX, STAA, STAN, SGY, SNCR, SVR, TTGT, TS, TSO, THQI, TLCV, UPL, UNTD, UAM, UTI, VCLK, VTR, DIS, WRNC, WBMD, GB, WMS, ZGEN.

Wednesday

• 7:00 am : MBA Mortgage applications
• 8:30 am : Q1 Preliminary non-farm productivity (last 1.9%)
• 8:30 am : Q1 Preliminary Unit Labor Costs (last 2.6%)
• 8:45 am : Fed Kroszner talks about foreclosures in Cincinnati
• 10:00 am : March Pending Home Sales m/m (last -1.9%)
• 10:30 am : Crude Oil inventories
• 1:00 pm : US Tresuary 10 year note auction
• 3:00 pm : Consumer Credit (last $5.2B)

Before the Open: AGN, ALD, AHCI, ALY, AOB, AHII, ARD, LSE, CLHB, CTSH, CTB, CXR, DVN, DTV, DTG, EMKR, EBS, ENB, XJT, FWLT, FTO, FCN, HSP, HWCC, NRGY, IDCC, IHR, JRCC, KNDL, KBALB, ID, LAMR, LM, MKTX, MMC, MMS, MDTH, MCCC, MGAM, NCR, NEWS, NTMD, ONNN, OHB, OSCI, OC, PCAP, PRFT, PNK, PXD, PLUG, QLTY, PWR, KWK, SBGI, SKYW, SEP, TRK, STE, BRLC, TTES, TOT, RIG, TRS, UNCA, VRX, WRES.

During Trading Hours: ACMR, JRT.

After the Close: AMCN, AEL, ARII, AHS, ANDE, ARNA, CAR, ACLS, BLKB, BBBB, CBOU, CENT, CCRT, COGO, CPII, CROX, CCRN, DNB, DRRX, BAGL, EAC, ENCY, ENOC, EXPD, FRT, FCH, FOE, FNET, ROCK, GIL, GCOM, GOLF, GXP, HCN, HIL, IDSY, TEG, IPAR, INAP, KNTA, LTRE, MVSN, MCGC, MRN, MBLX, MSTR, MR, MIVA, MSCS, NABI, NFS, NMHC, NSR, NWS.A, NHWK, NPSP, NVEC, ODSY, OEH, PDLI, PVA, PVR, PSPT, PCR, PROS, PL, PRSC, PSSI, RAH, RSCR, SAFT, SNTS, SVNT, SCI, SMSI, BID, BEE, TLEO, OVEN, UEIC, VRAZ, VOLC, WRI, WEDC, ZIPR.

Thursday

• 7:00 am : BOE rate decision
• 7:45 am : ECB rate decision
• 8:30 am : Initial jobless claims (last 380K) , continuing claims (last 3.019M)
• 10:00 am : March wholesale inventories (last 1.1%)
• 10:30 am : Natural gas inventories
• 12:30 pm : Former Fed Chairman Greenspan speaks in New York
• 1:00 pm : US Treasury 30 year note auction
• 1:30 pm : April ICSC chain store sales y/y (last -0.5)

Before the Open: KDE, ABH, ADES, ACM, ATK, AMSC, ABV, ASCA, AHR, ARCC, STST, ARQL, ATPG, ABTL, BKRS, BRL, BNT, BCRX, BIOS, BVF, BORL, BRKR, CVC, CALP, CAPA, CRZO, CELG, CTIC, CKP, LNG, CSK, CDL, CGX, CNSL, CEP, XTEX, XTXI, CRYP, CUB, CMLS, CYPB, DWSN, DTPI, DSCO, DRQ, DYN, EIX, EP, ENER, EPL, ENG, ENZN, FRP, FVRL, FVE, FRPT, FIG, IT, GEL, GLBC, GLBL, GPX, HEES, IDA, ISPH, IART, ISIS, JAH, JRC, KALU, KG, KOP, LXP, LCUT, TVL, LINC, LINE, LIOX, MAC, MIC, MPW, MEMY, TMR, MGPI, MEND, MLNM, MINI, MNTA, NDAQ, NGS, NRP, NRF, OMG, OCR, ORCH, VITA, PTIE, PRX, PKE, PDX, HK, PNCL, PXP, POZN, PGN, RHD, RDN, RCNI, RSTO, RTIX, SBH, SGK, SIRO, SBSA, SPH, SUP, SWSI, SURW, SFY, SXCI, TICC, TTEC, PNX, TRGL, TM, THS, TRMP, RMIX, USPH, URBN, VICL, VG, WMG, WW, WNR, WATG, WPL, XMSR.

During Trading Hours: SAM, DNDN, DIOD, EPEX, GCA, QSFT, RTK, WCI.

After the Close: APKT, ATVI, ADPT, ABCO, AEM, AIRM, AIRN, ARE, ALNY, AIG, ARP, ANSV, ARTE, AGO, ATW, BE, BLTI, BRNC, BRKS, BUCA, BLG, CAMP, CPKI, CPE, CNQ, CTLM, CNTY, COSI, DAR, DWRI, DXCM, DEIX, HILL, ESIO, EMAG, EXAR, FMD, GMST, GDP, SRVY, GUID, HANS, HLYS, ICFI, IFON, IUSA, INWK, NSIT, IOM, IPAS, DMX, JUPM, LEAP, LLNW, LOCM, LMNX, MSSR, MEDX, MRX, MED, MELI, MRGE, MIDD, MOVE, NCMI, NHP, NKTR, UEPS, NLST, NGAS, NUAN, NUCO, NUVO, NVDA, OCNW, PEIX, PZZA, PLLL, PMC, POWR, PCLN, PSA, RNWK, RUBO, WINS, SALM, SD, SAPE, SGMS, SGTL, SIX, SONS, SRSL, SNS, SHO, SUPX, TEAM, KNOT, THRM, TMA, TIE, TRMS, TRLG, GROW, URS, YSI, VSE, CHIP, VRSN, VITL, WON, INT, WPTE, XOMA, ZOLT.

Friday

• 8:30 am : March Trade Balance (last -$62.3B)

Before the Open: AER, AYR, BECN, CCU, CCO, CCOI, GTN, HUN, OMRI, SUG, STRL, WCRX, WR, WIN.

After the Close: SYNM, CYCC.