Friday, January 20, 2006

More Disappointing Earnings

Morning News of Note:
  • GE: GE Net Falls 46%, Hurt by Loss At Discontinued Operations General Electric Co.'s fourth-quarter earnings fell 46%, hurt by a loss at its discontinued insurance operations. But adjusted earnings rose slightly as five of the company's six units delivered double-digit growth, and GE boosted the lower end of its 2006 earnings outlook, saying the "economic environment remains positive." (Full Story) WSJ
  • PIXR: Animated Shorts Pixar got its start as an independent company with a short movie about a friendly looking desk lamp. It may conclude its independence by punching out the lights of short sellers. A report in The Wall Street Journal yesterday that Walt Disney may buy the digital-animation studio and maker of movies such as "Finding Nemo" sent shares of both companies higher -- a sure sign that many investors applaud the idea. (Full Story) WSJ
  • FNM FRE: Greenspan Seeks to Recast Debate On Fannie and Freddie Portfolios Federal Reserve Chairman Alan Greenspan in a letter released yesterday sought to recast arguments to cut Fannie Mae's and Freddie Mac's investment portfolios as a way to refocus the government-chartered mortgage companies on their public housing mission. Mr. Greenspan reiterated his previous concerns, and those held by the Bush administration, that Fannie's and Freddie's vast mortgage holdings pose a threat to the U.S. financial system which "normal market forces are unable to resolve." (Full Story) WSJ
  • Japan Markets: Heard on the Street... Tokyo's Bulls Stay in the Ring As Day Traders Lick Wounds, Fund Managers Remain Upbeat; Nikkei Halts Skid, Gains 2.3% For many global investors, this week's shakeout in the Tokyo stock market was almost welcome. A rush of sell orders forced the Tokyo Stock Exchange to shorten its sessions Wednesday and yesterday. This mass selling, sparked by scandal surrounding the Japanese Internet company Livedoor, sent the blue-chip Nikkei Stock Average skidding nearly 7% in three days, though there was a partial rebound yesterday that continued early Friday, Tokyo time. (Full Story) WSJ
  • Mad Money Summary: Cramer said that it may be time to look at debt collection as stories of how a good amount of bankruptcies hit right before the new laws went into effect. Cramer sees this as a positive for Portfolio Recovery Associates (PRAA). Cramer said that Portfolio Recovery Associates likes to buy debt from credit card companies for pennies on the dollar and then collect; he added that debt was a long-term story and expects the stock to stay strong. Cramer said there could be "a lot of money in curing cancer" and he is recommending Varian Medical Systems (VAR) as a radiation play. Cramer said that Varian's new machine, the Image-Guided Radiation Therapy system, could change the harmful way that cancer is treated. Herb Greenberg and Cramer both agreed that investors should stay away from AMR (AMR). Greenberg said that AMR will probably lose money and the company has a lot of debt. Cramer wrapped up his show with a hearing aid play, which is not based in the U.S, Amplifon. Amplifon trades on the Milan Stock Exchange, where Cramer recommends buying shares, but also has shares that trade on the pink sheets under symbol AMFPF

Market Comments: The market opened lower this morning, on poor earnings reports from GE, Citi, and Motorola. So far, it seems that earnings have not been as strong as the market was hoping for.

Oil is again trading higher, topping $67 this morning. Bond yields are down a bit to 4.37%. When the Fed takes short rates to 4.25%, there will only be a 12 basis point spread between overnight rates and 10-year Notes. Talk about a flat yield curve!

FFIV reported strong earnings and is bucking the weakness this morning. Other than that, the only group that is up are the energy stocks.

long C, GE


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