We asked in our weekend summary:
So with an eye on earnings, I am just prospecting which day we are going to gap up 1.5% premarket on surprisingly good earnings. Tuesday? Wednesday? Thursday?
We have our answer: Wednesday.
The week has essentially played out to the tee as we laid out
Tuesday, near monopoly CSX (CSX) reports after the bell - with Cash for Clunkers [remember we live in a subsidized economy where we steal from the future so our corporations can profit today, and we can pretend we have prosperity] should boost the railroad; further this is one of the industries with pricing power as CSX has been able to raise rates even in the face of the worst recession in half a century. Should surprise and make the market happy with talk of recovery even as railroad volume is relatively weak.
CSX had decent number last night although rail volumes were not great; they did get a boost from Cash for Clunkers; thanks taxpayers. They also said they believed the bottom was in... which was the same thing they said last quarter but it's still good enough to move stocks.
We can also be surprised by Intel's (INTC) beat - another near monopoly, who will benefit from the weak dollar, and Asian demand - all it's missing is Cash for Computers. People will be very excited and the Fast Money boys on CNBC will be hyperventilating about the results; futures should surge.
Intel shows you the power of chopping workers left and right; revenue was down from last year ($10.2B to $9.4B) but net income almost came in exactly the same (down from $2.0B to $1.9B). That's the power of leverage baby... hopefully more jobs can be cut in the coming months and in return we'll receive even more profits. Gross margins also jumped nicely...
Oligarch JPMorgan? Are you kidding me
The Franchise (Jamie Dimon) will bless us Wednesday (JPM) [Jul 21: NYT - In Washinton, JPMorgan's Dimon Increasing Sway] - remember with our banks we are creating an atmosphere where all of the citizenry must be sacrificed so the banks can out earn their losses on the balance sheet. [Apr 20, 2009: BB&T - A Better Gauge on How Banks Will Outearn their Losses]
A massive beat... again, your 7 year old niece could run a bank these days, just turn on the lights and print money. The Federal Reserve lets you borrow for near nothing... you can invest in US Treasuries for risk free return OR put the money in the stock market (ahem) OR go out of the box and try to invest money to people. You can receive fat fees for the refinance boom, you can receive fat fees for new mortgages the fully subsidized housing market, especially first time buyers. And we have not even got to their capital markets group - the tsunami of government debt has to be serviced by someone and now that many competitors have been vanquished in the crisis of 2008 you share the sandbox with far fewer players, so a growing pie with far fewer oligarchs to share it with. Houston, we have nirvana.
Remember, tomorrow morning we gap up on a huge Goldman Sachs beat, as they will make JPMorgan look like a feeble old man.... if you thought the capital markets number was great for JPM you ain't seen nothing yet.
I was bemused by this article in the FT.com - those socialists overseas are complaining about our corporate socialism... err, free market capitalism. They do not understand our system - by slashing workers, we allow them more time to shop - thus helping to drive our consumption driven economy. Our government gives the people money it does not have, companies cut costs (driving up profits), our stock market jumps, we all win here. The only thing holding back the socialists is their drive to keep people employed - a very unworthy goal. It's far better to not have jobs for your people and just have government support 20% of the population... geez, they will never learn over there.
- US companies appear to have cut far more jobs than their European rivals during the crisis, providing a possible explanation of why American groups are performing better than their competitors across the Atlantic.
- They said while US corporate profitability was boosted by the jobs cuts, the economy might suffer in the short-term from the shock of them.
Uhh, that is where you have it wrong... there is no suffering because that's where the government steps in offering future generations money to both consumer (and by proxy that consumer spends at the corporation). We all win... just make sure you are not part of the future generation who has to eventually foot the bill.
- Hans-Paul Bürkner, chief executive of Boston Consulting Group, said: “If you lay off people massively, you destroy confidence in the economy as a whole and inside the company.
Wrong, wrong, wrong Mr Burkner - you create prosperity by laying off people massively.
- “You see the performance of companies not picking up so dramatically in Europe because they are not so focused on the short term.”
Ok I'll give you that... we are all about the short term here.