hello, earnings season!

Friends, it’s earnings season once again – time to find out which stocks are hot and which are not, which can really deliver the goods, and which are letting all of us down.

It’s interesting, incidentally, to consider the concept of “market expectations”, which is so crucial to our perception of whether a given company’s earnings are good or bad. Case in point this month are the financials, which have all been so beaten up in recent months. Bank of America (BAC) reported a 44% drop in earnings based on even more real-estate-related writeoffs - yet because the company beat prevailing expectations, the markets’ net reaction was fairly positive. (As I type this, BAC shares were trading up around $29.) In other words, if expectations are crummy enough, almost any earnings announcement can be perceived as a surprise to the upside. File that in the strange-but-true category…

For earnings-hounds out there, Seeking Alpha offers a great selection of earnings preview reports for the most-anticipated announcements courtesy of TheFlyontheWall.com, including Apple (AAPL), Wachovia (WB) and JetBlue (JBLU).

And what’s the chatter out there about these big earnings releases, anyway? Jep2224 thinks Wachovia’s acquisition of Golden West may well save them from ruination – although ww2004 suspects WB will suffer from prime lenders cratering on their option ARM loans. MacRumors agrees with Bloomberg that AAPL will show 36% year-over-year growth from last year’s revenue – and this is before the incredibly brisk new iPhone sales hit their balance sheet. The WSJ’s Matt Phillips reports on JetBlue’s clever re-jiggering of flights: rather than cutting routes across the board, the company is actually expanding certain routes, like Portland to Long Beach, CA, and doing so by cutting flights in less-than-stellar markets.

If you cruise on over to the Jambaz Stock Finder, you can find even more stocks based on your earnings expectations for stocks like these. If you’re a contrarian-bull on financials, for example, you might want to check out MGIC Invest (MTG), Banco Itau (ITU), Ocwen Financial (OCN) or First Marblehead (FMD). Still think the financials have a ways to fall? The Stock Finder has suggestions for you there, too, from familiar names like BJ’s Wholesale (BJ) or Automatic Data Processing (ADP) to unfamiliar stocks like China Mobile Limited (CHL).

Are you high on industrials these days? Try Intercontinental Exchange (ICE), Manitowoc Company (MTW), Parker Hannifin (PH) or Verifone Holdings (PAY). If you’re not feeling the industrials wave at all, bears should consider Archer Daniels Midland (ADM), AFLAC (AFL) or Chunghwa Telecom Ads (CHT). Lots of new stocks to dig into, whatever you think will be hot or not!

Image: Hot or Not? By jm3 on flickr

Microsoft and Yahoo!: a match made in heaven or hell?

Will someone please explain to me (briefly) this on-again, off-again merger discussion between Microsoft (MSFT) and Yahoo! (YHOO)? Like most people who read the business section (but who don’t follow these two stocks closely), I’ve been noticing one headline after another threatening merger, followed the next day by another headline calling the whole thing off. At this point, it’s pretty clear there are some serious political machinations happening in the background, but it’s more than a little surprising that so much of that internal squabbling has been leaked to the public media. I thought I’d poke around the blogosphere and see if I can complete this fractured picture.

The New York Times’ Dealbook presented this inside look from Yahoo! CEO Jerry Yang’s POV this week – a pretty interesting intro read. Industry insiders ValleyWag chalked up this latest deal to another weekend-eater for poor Jerry Yang.  VentureBeat makes it clear that they find this marriage of two search-losers less than compelling against Google (GOOG)’s continued ascendency in that category. Kara Swisher at AllThingsD pretty much nailed it with her recent blog title: “MicroHoo: Can We All Get Along? Um, No.”

I’m a Google-searcher, plain and simple, so a merger based on sheer search numbers does strike me as a short-term move unlikely to provide long-term strategic advantage. At the same time, Yahoo! has proven a genius in developing super-sticky web applications for a full range of applications, habits, goofing-around, et cetera, and Microsoft’s web presence has never really taken off in the same way its OS and packaged-software has.

I’m no expert on these two, but I can see some value in overlapping their web presences. What I don’t see as valuable is their publicly picking each other to pieces. I’m bearish on MSFT and YHOO and long on GOOG until the first two can decide who they want to be when they grow up.

Image: Yahoo! and Microsoft logos from their respective websites

IndyMac and the battered financial sector

The WSJ’s report on IndyMac Bancorp (IMB)’s first day open after their federal takeover included an image of IndyMac’s customers lining up in the heat to claim their FDIC-insured funds. It was shades of pre-Depression bank runs, like the one from 1912 in New York City, pictured above. Unlike the frenetic pace of some bank runs back then, things are progressing in an orderly fashion at IndyMac – but it’s a troubling image, even so.

What does the blogosphere think of IndyMac and the ongoing turbulence in the financial sector? Are we hitting yet another wave of unexpected roughness? Or could these be the signs that the markets are finally working out the last ripple-effects of the mortgage crisis that began almost a year ago? As usual, there’s plenty of dissent and strong opinions to go around.

In a post entitled “The Blame Game”, the Foothills Cities blog nicely summarizes local media’s complaints against IndyMac, Wall Street itself, unscrupulous mortgage brokers, Chuck Schumer, and the mortgage-holders themselves. The Bank Watch takes the IndyMac failure as an opportunity to ask how stabile other U.S. regional banks are – and they think the situation won’t be as bad as the savings-and-loan scandals of the 1980s. At least there’s a little good news in this sector: Slate’s Moneybox editor Daniel Gross says “The cost of rescuing Fannie Mae (FNM) and Freddie Mac (FRE) will be way less than the amount they have saved American taxpayers.”

For my money, I think this whole thing is overblown. FRE and FNM, if not other financials, are being unjustly oversold. My reasons:

1. There’s no earthly way the federal government will allow FRE and FNM to fail – half of our country’s mortgage volume is tied up with either or both of these institutions.

2. This whole thing began with one analyst’s lone sell rating on FRE and FNM – and that was based on a possible change in accounting rules that might require additional, short-term capitalization for these two GSEs. It’s a real index of our willingness to go crazy over bad news that we collectively leapt at all these maybe’s and took them as a clear and final pronouncement of D-O-O-M.

We’re all too ready to accept the first whiff of trouble as super-serious – and we beat up stocks unfairly as a result. I’m bullish on FRE and FNM – and I’m sticking to my guns!

Meanwhile, let’s just hope everything can end as peaceably as it did in It’s a Wonderful Life – take a look at how Jimmy Stewart’s character calms the bank run in Bedford Falls.

Image: Run on East Side Bank, N.Y. 2/16/12 (LOC)

digging for gold

Just like panning for gold back in the California gold rush, looking for good stocks means separating a ton of dirt from that tiny little gold nugget.

I’ve been testing the Jambaz Stock Finder tool, and I gotta say: here’s your gold sifter extraordinaire. It’s a great way to kick-start your search for great, unexpected stock finds. Just enter your opinions on various sectors, and then check out the results. You’ll get several usual suspects that match with your sector opinions, but chances are you’ll get a few unexpected, very interesting results, too.

For example: recently I told our Stock Finder I was bullish on technology and oil, and in return I got quite a few stocks in those sectors, plus what seemed initially like a strange one:  the GPS manufacturers Garmin (GRMN) was the #1 stock, given my bullishness in those two other sectors. Not intuitive, but obvious once you think for a moment about the underlyng dynamics at play: when fuel prices go up, it makes sense that people will invest more in saving unnecessary miles.

There are so many research tools out there, getting raw data is no longer the hard part--it's getting fast to the right ideas to do the research on.  GRMN may not end up being the right stock for me, but a steady source of stock ideas like that is always welcome.

I like making products I’ll definitely use. In fact, I’m thinking of using the Stock Finder as a regular source of unexpected stock finds for this blog, so stay tuned…

Yoyo-ing financials

When will the yoyo-like ups and downs in the financial sector quit, I wonder? The Wall Street Journal nicely summarizes what is only the latest wave of carnage: mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE)’s need to raise $75 billion in capital fast to shore up their crumbling portfolios and meet a new accounting requirement. The move sparked sell-offs in all the financial stocks in the Dow Jones Industrial Average, from Bank of America (BAC), J.P. Morgan Chase (JPM), and Citigroup (C).

As usual, the blogosphere is afire with every kind of prediction. John Jansen at Seeking Alpha offers this sharp take explaining the drivers behind Fannie Mac and Freddie Mac’s sell-off. HousingWire questions whether Lehman Brothers was wise in speaking out about the two government entities’ (poor) ability to raise sufficient capital in the short-term to meet a possible revision to FAS140. TheTruthAboutMortgage takes a more neutral stance, and AccruedInterest is even more skeptical.

What’s your take? Are the deaths of all these financial firms greatly exaggerated? Or could all these breakdowns end in a chain of real flameouts across the financial sector?

Image: Yoyo by XulianConX

Building a new home or buying an existing one?

In the process of finding a new home, everyone has to answer that particular question, and each person has his own approach. As I shop for an apartment myself, I’m weighing this one right now. (Also, as an engineer by training, I have an evergreen interest in this topic.)

Building a new apartment interests me for the new materials and higher security standards. On the other hand, buying an existing one can be a more charming place (if we like the style): we can have a higher-quality place (since old building standards are often more rugged and enduring than newer ones). From a green perspective using an existing place is certainly more energy-saving than creating a new one from scratch.

But the drawbacks are pretty clear, too: old places have more risks to include lead paint, asbestos hidden in many materials, old and faulty electricity standards, etc.

The middle path between these two possibilities would be to own an old place that's been upgraded to the new building code; is it impossible?

[image: Concrete Housing Construction in Chile by Concrete Forms on flickr]

Rising steel prices keep hitting Micro/SME’s hard

As industrial and financial developments explode in China, the country stays hungry for raw steel and is constantly on the lookout for more. China consumed 120 million metric tons of steel in 2000, and has by 2005 passed 300 million. They also consume an estimated 40% of the world steel production. Chinese entities pay top dollar for virtually all types of metal, and the trend does not seem to change in the near future.

While steel prices keep rising, small- and medium-sized as well as micro-enterprises struggle to keep up with their orders – partially due to increased prices of steel but also because it’s steadily getting harder to actually get hold of it. Companies dealing primarily with refined steel products can only watch as local steel suppliers run out of their stock – and accordingly try to restock at continuously increasing costs. Orders negotiated and signed months ago face a dramatic loss in profit as the price of raw steel have almost doubled in the last 6 months.

Smaller companies – often depending on one or two steel flagship products - hence face the ultimatum of either increasing their prices by 40% to maintain profitability, or investing time and money into new revenue streams to stay profitable. As resources are relocated, income steadily goes down and often threatens to take companies down with it.

At the same time, the steel producers of the world are doing great: ArcelorMittal (MT), traded at $60 at the end of January, $101.61 as of today. United States Steel Corp. (X) has gone from about $100 to $129.09 in the same timeframe. The trend is very similar throughout Europe as well, making it pointless for companies to consider alternative sources of material.

So are we looking at new, world-wide conglomerates controlling not only the world's steel supply but also steel-based products for the consumer markets? Will micro-enterprises and mom and pop shops steadily be taken to the cleaners or even forced out of business? As long as steel remains a pretty irreplaceable material for a colossal array of applications, this scenario might unfortunately not be impossible.

Oil to hit $200

Oil prices threaten to hit $200 a barrel in an upcoming months as producers fail to keep pace with blistering demand from China and the Middle East. US crude prices hit a fresh high of $137.00 a barrel today as rebel attacks on Shell installations in Nigeria and tensions in northern Iraq continued to strain markets already caught in a crunch. Most analysts agree that the oil price will reach $150-200 limit within next 6 to 24 months.

The main reason for steady increase of price is rising demand. The other factor is the non-OPEC countries that limit their output (like Russia).

There is some good news as well. The drilling cost for oil and gas wells has actually fallen slightly over the last two years, and even deepwater rig rates have been flat after jumping five-fold since 2004. Some 65 deepwater rigs are coming on stream over the next two years, compared to 10 from 2002 to 2007. There is some hope for new fields in Brazil, too.

What’s your “grand vision” for social media?

A VC in NYC reveals his “grand vision” for social media of the future which, like most grand visions, is audaciously simple: “every single human being posting their thoughts and experiences in any number of ways to the Internet.” Sounds simple, but think about the implications of that statement. “Every single human being” includes fishermen in Burma, a billion workers in China (if their government can manage to keep controlling their web activity), scientists working in the Arctic. “Experiences” includes real-time observations of riots, hurricanes, political rallies, scientific discoveries. And “in any number of ways” we’re already seeing: from Twitter updates to blog readers to moblogging to social movements online of every stripe.

Interesting to see how other social media gurus are trying to boil down their visions to a single relevant term in response. Alexander van Elsas says the magic word is “interaction”. Furrier.org says it’s “relationships”. Either may prove correct, but every social media business will need to define its exact value. Just like the original web, Web 2.0 isn’t going to remain unsegmented by industry for long.

For Jambaz and social networking for investors, I’d posit two buzzwords: “opinions” and “credibility”. Investors talk, buy and sell stocks because they have strong opinions – and the markets work globally because we all don’t share the same opinions. It’s those opinions that drive us into conversation and investments – and testing those opinions for accuracy is crucial for any investor’s success over time.

I mentioned “credibility” because I think that’s what Jambaz offers that the offline world of “stock chat” does not. Sure, your golf buddy has stock opinions. So does your barber, your brother-in-law, your cubicle mate at work. But do you have any proof that they’re really making money with those opinions? It’s not really cricket socially to bring your brokerage statement to cocktail hour to back up your claims. But in communities like Jambaz, you can verify a user’s success or failure

It’s fun to interact, and even funner (at times) to build relationships – but for social investing neither is particularly necessary. You don’t need to make friends first with other Jambaz investors to benefit from their stock knowledge; you can interact or not as you see fit. But you will be able to verify their claims to success, follow their moves instantly if they are successful, and learn to invest more profitably as a result. Web 2.0 can work in many different ways. We’re banking on a new model where accountability, transparency, and proof are the watchwords, so that ALL individual investors’ boats can rise together. Why not?

Tags: social media, Web 2.0, social investing, community

Image: Neon crystal ball by Saveena (aka LHDugger)

iPhone...not for my mum!

Even before the iPhone came out, all of us were already dreaming of owning one...but now that we know the iPhone G3 is on its way, we're even more eager.

It has now been almost a year since its initial release in Europe, where I’m working in Jambaz’s Luxembourg office. Now that it's out there, most of the tech geeks have one (most of the others as well).

My mom just received the original iPhone for her birthday; in fact she got attracted by the iPhone only because of the huge noise around this phenomenon.

She barely used most of the features of her previous phone, so I am now wondering what she's going to do with the iPhone.

Let's talk about her use of personal information management tools:

• Email: She never used desktop email software apart from online email services such as Yahoo! mail or Gmail

• Contacts: She doesn't centralize her contacts in one place but rather keeps them scattered in her PC, cell phone and paper address book (of course)

• Agenda: Her agenda is partly done on a huge cardboard calendar, and some reminders are set directly into her cell phone

• Music: Her music, oh, at least her children and grandchildren are close by to organize her music library with music THEY like (ha ha)

• Photos: They’re backed up on CDs and DVDs, but I’m not sure if she knows how to transfer them to her PC. At least she will be able to take pictures directly from her phone

• Videos: Sony had some great video cameras in the 90s; they still work great, so it’s going to be difficult to transfer anything from those 8mm videocassettes.

Overall I would say that this phone will be used for about 5% of its features, so who’s the winner here? I'll let you decide…

Having said this, I’ll go for a “Strong buy” on Apple, Inc. (AAPL) who is even gaining market shares in segments where all the other tech companies are still struggling.