Thursday, July 14, 2005

Morning Update

"Blessed are the young, for they shall inherit the national debt." - Herbert Hoover

Morning News of Note:
  • Housing Bubble: Safe Shelter Australia Suggests End of Home Boom Needn't Be Dire Economy, Stocks Are Strong After Central Bank Raises Rates to Stop Speculation Worries on Consumer Debt In May 2002, as talk of an international housing bubble was just beginning, Australia's central bank was already acting. Warning of "overheating in the housing market" in Australia, it raised interest rates. It kept on raising rates the next year, and officials talked loudly about the threat of housing prices getting too high. (Full Story) WSJ
  • GE: GE May Post Biggest Increase in Profit Since 2003 General Electric Co. may post its biggest profit gain in six quarters tomorrow on increased sales of new industrial equipment including wind turbines and an expansion in consumer lending in Asia and Eastern Europe. Second-quarter earnings at GE, the world's No. 2 company by market value, rose as much as 25 percent to $4.7 billion, or 45 cents a share, Chief Executive Jeffrey Immelt said during a conference call on May 6. (Full Story) Bloomberg
  • CEO UCL CVX: Cnooc May Raise Unocal Bid as U.S. Opposition Mounts Cnooc Ltd. is preparing to raise its $18.5 billion cash bid for Unocal Corp. to persuade the U.S. company's board to break a merger agreement with Chevron Corp., the Financial Times and Wall Street Journal said. The new offer would include as much as $2.5 billion in compensation from Cnooc should a takeover by the Chinese state- controlled company fail, the FT said, citing unidentified people. Chevron's cash-and-stock plan was worth $16.5 billion yesterday. (Full Story) Bloomberg
  • AAPL: IPod Sales Give Apple 75% Jump in Revenue Showing continued strong growth of its popular iPod digital music player and impressive personal computer sales in the United States, Apple Computer reported quarterly earnings on Wednesday that far outpaced the expectations of financial analysts. Apple said net income for its third quarter, ended June 30, rose to $320 million, or 37 cents a share, from $61 million a year ago, or 8 cents a share, adjusted for a stock split. (Full Story) NY Times
  • TWX: AOL Hopes for Great Mileage Out of Its Souped-Up Web Site America Online has been called the Internet on training wheels. No more. The new AOL aims to be the Internet on oversize racing wheels, a tricked-out surfing machine built for show and speed. This shiny new entry into the race for Web supremacy is live at, a Web site that lacked pizazz and purpose for nearly a decade despite repeated redesigns. (Full Story) Washington Post

Market Comments: The market gets a big bounce at the open, pushing the S&P to new highs for the year. The early strength comes on the heels of strong earnings last night from AAPL, AMD, and YUM. This morning, we got better-than-expected reports on the CPI (+0.0% vs. +0.3% consensus) and retail sales (+1.7% vs. +0.9% consensus).

This market is short-term overbought, but it's hard to argue with a market making new highs. Recent pullbacks have been modest, which keeps investors who want to participate having to chase stocks higher. But the Nazz isn't even in positive territory for the year, so I think further upside is reasonable. But stick with the stocks that have been leading the market, not lagging.

long TWX, GE


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