Monday, October 19, 2009

It's Apple season...

Apple blew away their numbers again on the strength of mac sales and iphone sales (I'll admit to not getting the iphone thing. It seems like a productivity killer, rather than a productivity enhancer.) Apple's also tweaked their accounting allowing them to pull forward revenues that used to be recognized over years. It's like your cable company saying, "well you are locked up for 2 years at $125/mth so we're going to recognize $3,000 for your account today." Having said that the markets continue to explode higher and look to have room to run another 1,000 pts on the Dow (although it's completely unwarranted---see the end of the post).

On a separate note, the new Verizon Android "i-Dont" ads are awesome.

It looks like the $15,000 tax credit for home purchases is closer to reality today.

"Lawmakers have said they are considering extending or expanding the tax credit.

Senate Majority Leader Harry Reid backs a bipartisan bill to extend the credit for six months. A Senate Republican plan would expand it to $15,000."

Keep that in mind the next time you hear either party claiming to be the party of fiscal responsibility. The real revolt should be to take back the power of the purse from Congress. This collection of lawmakers has the financial sense of a meth addict. The solution for too much debt, must be pumping more debt into the system, right? Keep feeding the addiction.

I've already figured out a loop hole through which I can steal from taxpayers, I mean, utilize the the expanded credit.

As soon as it passes, I buy a fixer upper in Clayton for $60k and collect $15k credit. A month later I sell it to my brother for $45k, he collects $15k credit. A month later he sells it to my mom for $30k and she collects $15k credit. A month later she sells it to my daughter for $15k and she collects $15k credit. YEAH!! We just got a free house on the back of the TAXPAYER, but at least the real estate agents won't get rich charging 6% on every transaction.

Don't think some of the people that participated in various mortgage frauds won't see this "opportunity".

John Hussman - one of the more respected names on Wall Street - says that stocks are at their most overbought state since, well, EVER. This isn't really news, and stocks can stay overbought for an extended period, but at some point the equilibrium has to be restored.

"That said, investors clearly are approaching the current market with every belief that the extreme valuations of 2007 represent the sustainable norm to which stocks should return. This despite the fact that the 2007 peak reflected rich valuation multiples against earnings that were themselves inflated by abnormally elevated profit margins. Last week, Bill Hester reviewed the evidence that forward earnings estimates presently assume a return to record profit margins observed just before the market turned down. If the expectations of investors and analysts are heavily anchored to those 2007 levels, as seems to be the case at present, then the fact that stocks are richly valued on the basis of sustainable, normalized earnings and cash flows may not be sufficient to give investors pause."

"I would be less than forthright, however, if I didn't admit that I suspect the current overbought condition may be cleared somewhat violently."

This is an option expiration week and that means there is a lot of incentive to pin the markets at 1,100 on the S&P500 by Friday. Looks like that's where we're headed.

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